Author Topic: Cyprus - Buying Opportunity ... but when?  (Read 15405 times)

Ottawa

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Cyprus - Buying Opportunity ... but when?
« on: March 18, 2013, 06:38:42 AM »
SO, I have some new cash that I was intending on investing this week.  However, the Cyprus deal will make markets tank today, offering an unexpected sale!  The question is - how long will things be on sale for...will the vote pass or not by this time tomorrow?  Obviously you can't time the market, but you can certainly get a better price with events like this. 

Having said this, I don't want to be greedy...and wait to see what happens with the vote...and so I will probably buy today as I think the risks to the global economy (by this event) are over-exaggerated and it will be FEAR that causes people to sell and markets to panic.  Buy GOLD, BONDS the sheep will say or the government will take your money.  Except, in North America at least, they can't and won't. 

chucklesmcgee

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #1 on: March 18, 2013, 09:18:59 AM »
Quote
Obviously you can't time the market, but you can certainly get a better price with events like this.

Well that would be timing the market then, now wouldn't it? Chances are Cyprus will back off of seizing assets in the next day or two if they figure out another way to scrape together a couple billion, but they might not. They might not be able to find out any other way to raise funds or those fundraising options are just as bad; interest rates on European debt increases due to fears of collateral Cyprus debt hurting other countries banking system, which in turn snowballs the European debt crisis, destabilizing the Eurozone, the Euro and leading to massive bank runs and a global depression. You don't know. No one knows. But the market's already priced all of this in.

So you can't say for sure it's a "better price" without first being certain that the market's going to go back up relatively quickly, and you don't know that.

Ottawa

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #2 on: March 18, 2013, 11:51:50 AM »
ha ha!  I hear what you say but since I was stashing money in the stock market this week anyway....I get to buy more shares that had there not been a 'crisis'.  This is good luck of course, not management. 

Paul der Krake

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #3 on: March 18, 2013, 12:10:24 PM »
It's of course very early to draw conclusions but at 2pm ET the US markets are only in slight decline, not much of a tanking trend yet.

skyrefuge

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #4 on: March 18, 2013, 12:57:44 PM »
However, the Cyprus deal will make markets tank today

Oh, it will?

At 2:30pm, the DJIA was above its opening value. Hmm. 

Oh, I know! Most people watching the markets just haven't gotten around to reading the newspaper yet, so it's only the rare few super-tuned-in people like you who even have heard about the Cyprus deal. So we just need to give 'em more time to react to the news once they finally hear about it.

Um, yeah, so hopefully this market-prediction-fail will once-and-for-all end the "I know market timing doesn't work, but please help me time the market" threads. Ok, I know it won't, but at least it might make the people posting them feel more suitably embarrassed.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #5 on: March 18, 2013, 01:00:56 PM »
I think the Cyprus news puts another nail in the bull's coffin.  I think markets could very well be in a topping process (which takes time to unfold) and could  be setting up for the mother of all crashes.  It's a core tenant of Mustachianism that you can't cure a debt problem by going deeper into debt.  But that's precisely what is going on in the West, and it's working -- until it doesn't.  Yes, I'm using "hedging" terms, but there's no absolutes in the market.  It's a fluid situation and I intend to remain flexible.

I'm no perma-bear.  I've  made the majority of my money being long the market (especially this year), but I just sold the last of my longs (some JBLU, a little HPQ I've been trading around, and a dash of AAPL calls I bought last week) and I have started to accumulate in a small way some June SPY puts (call it a 10% short position) with the intention of getting much shorter as the SPX approaches the 1600 level.  I'm a tactical investor and intend to use these levels as a backdrop as I brace my portfolio for what I perceive to be impending market chaos.

The OP asks "when?"  I say "when it feels utterly wrong to buy'em."  We're not even close to that.

 


Tyler

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #6 on: March 18, 2013, 01:48:54 PM »
You can't outsmart that which is not rational.

Left

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #7 on: March 18, 2013, 02:02:05 PM »
I don't think today or any other news will make the market that bad, just looking at the ones I watch today, I see nothing out of the ordinary, sure they dropped ~1-2% but they do that on any given day. They also went up too on a few. So nothing really seems too affected by this, even with the market down today, it isn't really "down". It could just be a slow start to the week like it was previous weeks when it wasn't starting up

Kazimieras

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #8 on: March 18, 2013, 02:50:55 PM »
Like other posters said, don't try to time the markets since you will lose. I first heard about this Saturday morning, which means the markets would have already adjusted in after market trading by then. Today's dip could be caused by the selling of mutual funds which want to lock in a gain before the start of the next quarter (it happens every quarter).

If you want to invest, find a company with good fundamentals that you understand, research them and then buy. Otherwise, save yourself some trouble and just go to the casino.

Side note about Cyprus - they didn't seize the assets... they more 'expropriated' them. Anyone's assets they took were given stocks in bank in which their money was held. Not something I'd wish upon anyone, but it was a clever way to shore up the banks without a government bailout.

projekt

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #9 on: March 18, 2013, 03:55:28 PM »
I'd say the uncertainty about a Cyprus haircut has been fully priced in by now. Domestic stocks are down less than 1%, worst market drops are in Asia. I don't know if there's a good story to say that there's a sale on stock right now.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #10 on: March 18, 2013, 05:00:25 PM »
I'd say the uncertainty about a Cyprus haircut has been fully priced in by now. Domestic stocks are down less than 1%, worst market drops are in Asia. I don't know if there's a good story to say that there's a sale on stock right now.

Was it over when the Germans bombed Pearl Harbor? :)

"Fully priced in" is such a nebulous concept, IMO.  We shall see.

Kazimieras

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #11 on: March 18, 2013, 10:25:12 PM »
Was it over when the Germans bombed Pearl Harbor? :)

"Fully priced in" is such a nebulous concept, IMO.  We shall see.

If the knowledge is public, you can bet the market thinks it has adjusted it prices accordingly.

And amazingly some may say it never started with Pearl Harbor as you described... mostly since it was the Japanese that bombed it, not the Germans ;)

Tyler

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #12 on: March 18, 2013, 10:29:21 PM »
Forget it.  He's rolling.  ;)

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #13 on: March 19, 2013, 06:40:33 AM »
Was it over when the Germans bombed Pearl Harbor? :)

"Fully priced in" is such a nebulous concept, IMO.  We shall see.

If the knowledge is public, you can bet the market thinks it has adjusted it prices accordingly.

It may think it has, but it hasn't.

Stuff gets mispriced all the time.  If you don't believe me, then I got an internet stock I want to sell you in February 2000, or a condo in Miami in 2005, or an MBS CDS in the summer of 2007.   


destron

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #14 on: March 19, 2013, 08:38:25 AM »
Personally, I think that the Euro markets are likely to have more instability in the short term future but I think it is too difficult to predict what will happen in this case so I am going to continue to invest as normal.

At 2:30pm, the DJIA was above its opening value. Hmm. 

The DJIA is a nonsensical way to track the stock market because, not only does it track a very small selection of stocks, it does not use a weighted average.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #15 on: March 19, 2013, 08:43:51 AM »
Personally, I think that the Euro markets are likely to have more instability in the short term future but I think it is too difficult to predict what will happen in this case so I am going to continue to invest as normal.

At 2:30pm, the DJIA was above its opening value. Hmm. 

The DJIA is a nonsensical way to track the stock market because, not only does it track a very small selection of stocks, it does not use a weighted average.

Agreed about the "invest as normal" motto.  Anyone basing long term moves on the everyday noise of the marketplace is setting themselves up for major underperformance over the long haul. 

That said, the topical shit that comes up is interesting cocktail conversation, not to mention it allows speculators like myself a chance to unleash some risk and to post about it in the effort to appear smart and engaged. lol!
 

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #16 on: March 19, 2013, 09:25:39 AM »
Euro banks -- DB, SAN -- trading weak again (down 2-3%).  This is an important clue in determining how much of the Cyprus news is "priced in," since any potential problems are likely to manifest in the financial space first.
 

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #17 on: March 19, 2013, 10:24:31 AM »
Bank sector sell off accelerating, DB and SAN off 4-5%, US banks joining their Euro counterparts in the red zone.  Cyprus Finance minister attempting  to resign, market confidence is being tested.

I still think things are just heating up. 

Ottawa

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #18 on: March 19, 2013, 10:45:10 AM »
Crap.  just lost my reply...

in short - smedleyb - I like your thinking and analysis on this matter.

I was not trying to start a discussion about market timing...rather market opportunity.  Semantics aside, I'm a dollar cost averager.  Once a month I rebalance my portfolio (ETF's free to buy at Questrade) by adding new money to the relevant assets...rather than rebalancing once a year. 

I had extra money this month to invest which I will use to buy ZDV (Bank of Montreal Canadian dividend ETF) and VTI (Vanguard Total market).  I thought I'd try an experiment and take the Eurozone inflamation caused by the Cyprus event to enter when the market was in fear mode.  Since I was going to enter anyway...I don't see anything other than potential opportunity.  Thus, I've been paying much more attention to market events than usual (i.e. NONE). 

iamlindoro

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #19 on: March 19, 2013, 10:52:34 PM »
And amazingly some may say it never started with Pearl Harbor as you described... mostly since it was the Japanese that bombed it, not the Germans ;)

http://www.imdb.com/title/tt0077975/quotes?qt=qt0479926

projekt

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #20 on: March 21, 2013, 11:34:58 AM »
Again, the markets just don't seem to be that concerned about news from Cyprus. Or, perhaps they are, but there's great positive news from somewhere else. Or maybe it's Thursday and that's when people do whatever. Yesterday, the Fed was probably "responsible" for any market bad news. Market reporting is "post hoc ergo propter hoc" 100% of the time.

If you believe at all in the EMH, little events like Cyprus are priced in at announcement. If they represent a huge systemic risk, that should be represented by the market dropping. If they do not, the market will continue to appear noisy and long-term trends will dictate the results.

The EMH doesn't predict that Citigroup would have a sudden sell-off back in 2011. But it does seem that prices before were pretty much accurate based on prices after. If it was so obvious, though, that Citi would rebound, the drop wouldn't have happened.

But, you know, perhaps Cyprus is a tipping point like Lehman. In that case, when are you going to buy?

I do believe it is possible to outsmart the market some of the time. But I think that taking the biggest economic news story on Monday and thinking it's going to lend itself to an easy "buy/sell" answer is probably wishful thinking.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #21 on: March 21, 2013, 01:03:57 PM »
If you believe at all in the EMH, little events like Cyprus are priced in at announcement. If they represent a huge systemic risk, that should be represented by the market dropping. If they do not, the market will continue to appear noisy and long-term trends will dictate the results

After living through the tech bubble, the real estate bubble, and the bank bubble all within the course of 8-9 years, I would say no, I don't believe at all in EMH.

To follow up, I covered my SPY puts about an hour ago (after covering Tuesday and reshorting them yesterday morning) and will wait for another push higher by the bulls before I unleash put hell on this damn market!

That's my plan and I'm sticking to it.  I think volatility is about to explode.  Buyers beware.   

« Last Edit: March 21, 2013, 01:13:58 PM by smedleyb »

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #22 on: March 28, 2013, 06:47:46 PM »
The final push higher I envisioned last week is playing out as we speak.  At the close today I bought a 25% put position in the SPY, and I intend to increase it by 25% every 5-10 points higher.  In fact, by 1580-1585 I expect to be fully short this market.  I see a 1% up, 5% down situation, and I'm loving that risk/reward.


projekt

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #23 on: March 29, 2013, 12:04:21 PM »
Just curious, what expiration date are you buying puts at?

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #24 on: March 29, 2013, 04:39:32 PM »
Just curious, what expiration date are you buying puts at?

Sept. 158's. 

projekt

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #25 on: March 30, 2013, 10:11:14 AM »
Interesting. S&P 500 below 1510 by September. I'm not sanguine about the near future of the S&P 500, which is why I diversified a bit, but I'm not ready to buy puts on it.

Retrospectively, the Cyprus event does not appear much different from the rest of the volatility of the index. If you bought at the end of the day on the 19th, yeah, you're up 0.4%. But if that was a behavioral blip, it was a pretty tiny window of opportunity.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #26 on: March 30, 2013, 12:49:07 PM »
Interesting. S&P 500 below 1510 by September. I'm not sanguine about the near future of the S&P 500, which is why I diversified a bit, but I'm not ready to buy puts on it.

Retrospectively, the Cyprus event does not appear much different from the rest of the volatility of the index. If you bought at the end of the day on the 19th, yeah, you're up 0.4%. But if that was a behavioral blip, it was a pretty tiny window of opportunity.

SPY 158 = SPX 1580. 

And the odds of me holding these puts beyond the next several weeks is slim to none (let alone waiting till Sept. expiry).  Just attempting to minimize option decay as I think we are in some kind of topping process (as I stated two weeks ago) even though I am fully aware we could see a continuation of the slow grind higher into next week and maybe the week after.     

I'm partly keying off Euro banks (BSC, DB, SAN) as well as the BKX to confirm what I perceive to be an underlying weakness during this modest push through the old all time highs on the SPX.  It's not like I'm on these boards posting about this trade and that trade.  I tend to speak up only when others raise the issue and my conviction level is high. 

projekt

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #27 on: April 01, 2013, 11:59:30 AM »
Quote
SPY 158 = SPX 1580. 

True, but the puts are around $7.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #28 on: April 01, 2013, 12:19:47 PM »
Quote
SPY 158 = SPX 1580. 

True, but the puts are around $7.

Right on.  Duh smedley!  Like I said, I never exercise options, but I've had my share expire worthless.  I'm keeping this trade tight and will risk a couple dollars on each contract.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #29 on: April 05, 2013, 02:43:06 PM »
Quote
SPY 158 = SPX 1580. 

True, but the puts are around $7.

Sold'em all this morning, projekt.  Will look to re-up on rallies above SPX 1560.  I think the topping process I've alluded to the past several weeks is beginning to unfold.  I'm in "short the rallies, cover on dips" mode. 

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #30 on: April 09, 2013, 11:59:10 AM »
Quote
SPY 158 = SPX 1580. 

True, but the puts are around $7.

Sold'em all this morning, projekt.  Will look to re-up on rallies above SPX 1560.  I think the topping process I've alluded to the past several weeks is beginning to unfold.  I'm in "short the rallies, cover on dips" mode.

Speaking of which, like a moth to a flame, I just re-upped a tiny put position as SPX crosses 1572.  Let's call it about 10% of the total short bet I plan on making in total over the next several sessions (as the SPX moves into 1580-1590 zone).

Just staying true to my word and keeping fellow mustachians up to date on my actions.   I think a nice downside move is about to unfold (minimum 5%, but I think possibly closer to 10-12%).  And as a further note, a market that moves above 1600 SPX and stays there invalidates my bearish thesis. 

Game on, bulls! 

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #31 on: April 09, 2013, 12:47:36 PM »
Shorting another 10% as SPX nears 1574.  Resisting the urge to short even more -- for now.

April 10 11:42am: pretty much all in short at SPX 1585, call it 80%.   I'll save a little ammo for a final pop higher but the line in the sand is pretty much drawn.  A move above 1600 SPX that sticks is my cue to exit and regroup. 

Viva Las Vegas? lol!
« Last Edit: April 10, 2013, 09:47:00 AM by smedleyb »

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #32 on: April 15, 2013, 05:45:11 AM »
Wake up this morning to find red arrows across the globe, gold bugs getting squashed, and the SPX ready to open ten handles lower.  As a matter of trading discipline I'll look to cover a small piece of my short at the open.

The action in gold is quite telling IMO as it points to increased equity volatility on the horizon (commodities and stocks tend to move in sync).  At one point this morning the shiny metal was down 7%.  I still think things are about to get nasty on the volatility front as the expectations for the future struggle to assimilate recent negatives (weak retail sales, sluggish job growth, the bubble in S&P 500 profit margins).

   

brewer12345

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #33 on: April 15, 2013, 07:55:39 AM »
I think gold is not like other commodities.  It may trade with them for a while, but it is driven much more by speculators and panicky hoarders than by end users compared to stuff like corn and oil.  I am not shocked to see hot air come out of gold.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #34 on: April 15, 2013, 08:20:06 AM »
I think gold is not like other commodities.  It may trade with them for a while, but it is driven much more by speculators and panicky hoarders than by end users compared to stuff like corn and oil.  I am not shocked to see hot air come out of gold.

Slightly older chart but the correlation is self-evident:




brewer12345

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #35 on: April 15, 2013, 08:58:30 AM »
Interesting chart, thanks.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #36 on: April 15, 2013, 12:08:23 PM »
Selling a larger number of puts here at SPX 1562, and currently sitting with slightly less than half the puts I started the day with (which was too many for my comfort). 

edit:  3:54pm, selling half of remaining puts at SPX 1555, leaving me with roughly 20% of the puts I had this morning.

Short the rips, buy the dips.
« Last Edit: April 15, 2013, 01:55:48 PM by smedleyb »

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #37 on: April 15, 2013, 02:07:46 PM »
Just sold the remaining puts after hours with the SPX at the lows of the day. 

Prayers going out to everyone affected by the awful Boston Marathon tragedy.  Sickening.

brewer12345

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #38 on: April 15, 2013, 02:23:27 PM »
smedley, did you make money on your puts?  A lot, percentage wise and in absolute dollars?  I mostly have given up on options trading (aside from covered calls and cash secured puts) since I think the risk usually outweighs the reward.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #39 on: April 15, 2013, 06:49:48 PM »
smedley, did you make money on your puts?  A lot, percentage wise and in absolute dollars?  I mostly have given up on options trading (aside from covered calls and cash secured puts) since I think the risk usually outweighs the reward.

I absolutely crushed it today.  My trading account was up almost 10%, but that was actually the least of it.  Spent the evening coaching my 8 year old son's baseball team, something the father of the little boy who died in Boston will never get to do.  For some reason I can't shake that thought. 

Tonight I feel incredibly grateful, and it's got nothing to do with money.

peace, and thanks for asking.           





 

 


smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #40 on: April 18, 2013, 12:17:26 PM »
Still involved, still selling rips and buying the dips.

I think the market is about to tank hard.  Buyers beware.

brewer12345

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #41 on: April 18, 2013, 12:42:25 PM »
I'd say we are overdue for the usual 5 to 10% correction commonly seen as part of a long term advance.  Since I have a pile of cash just waiting for a home, I am ready.

vwDavid

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #42 on: April 18, 2013, 12:45:33 PM »
bring it on....

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #43 on: April 18, 2013, 01:06:17 PM »
For those technically inclined, 1540-1545 represents recent lateral support and the 50 DMA.  If  we lose this zone (battle unfolding as I write this) it's gonna be a quick 50 SPX points to the downside.  If the market rallies above 1545-1550 with authority, I'm out of this trade. 

(edit -- meant will cover above 1545-1550, not 1555-1560.)
« Last Edit: April 18, 2013, 01:12:52 PM by smedleyb »

brewer12345

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #44 on: April 18, 2013, 01:18:34 PM »
Meanwhile, nat gas seems to live in its own bubble, separate from other commodities.  Serious mojo today.

smedleyb

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #45 on: April 18, 2013, 01:31:53 PM »
Meanwhile, nat gas seems to live in its own bubble, separate from other commodities.  Serious mojo today.

Legendary investor Jeremy Grantham spoke at a value investing conference today in Toronto.
According to The Globe And Mail's Martin Mittelstaedt, Grantham recommend three long-term investments: natural gas, copper ore, and phosphorus.
His thesis on natural gas was particularly aggressive.
He believes that the current supply glut, which is keeping prices low, will soon reverse and cause prices to explode.
According to Mittelstaedt, Grantham believes in five years "the price will have tripled."



Read more: http://www.businessinsider.com/jeremy-grantham-buy-natural-gas-2013-4#ixzz2QqSU0FKS


brewer12345

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Re: Cyprus - Buying Opportunity ... but when?
« Reply #46 on: April 18, 2013, 01:34:16 PM »
Everyone has been pessimistic on nat gas for a long time, but the basic industry economics and laws of supply and demand have not changed.  The glut will get burned up by hogs (end users) gorging on cheap energy and the producers have stopped drilling.  Only a matter of time before prices rose.  I don't think you will see new drilling activity until gas goes over $6.  I am long CHK and am watching UPL.