Teggatz Enterprises LLC Trade Journal

The vice president of the Company expressed a desire for paperwork and “real work,” and I pointed out that she has a business degree and might turn her eye to our corporate taxes. We’ll see. I’d put a fire under her ass about job performance but she’s my wife so I let it slide.

A friend of mine remarked that he thought the market was at a low, I believe he meant this before trading Friday, and remarked about Chinese stocks.

Don’t know anything about Chinese stocks but there has been a lot of speculation about China’s economic situation and a lot of talk about a “hard landing” from excess liquidity and a housing bubble like in the US. The US market is a strong performer worldwide and I would be inclined to think this trend will continue. America is lean and mean and ready for action. Further, I’ve heard it remarked that the easy money was made in China several years ago, and what I do know about China inclines me to agree. So I’d stick with US stocks or the German DAX.

I don’t think we’re at any low. I think the market is going to have a small correction. We might get a small pop here and there but the seasonal pattern at this time of year is sideways or downward.

I would anticipate a sideways or downward US market for the next 3 months roughly, and then a very strong bull market starting around June 4 through November. This assessment is based partly on market patterns during election years. For some reason the market has patterns that correspond to the presidential cycle.

Personally, I’m in cash and waiting for the June 4 bull run. At this point I will probably buy value blue chips, for example AA, BAC, GE, etc., any blue chip that has a low price. Part of my reason to do this rather than buy options is to minimize transaction costs with thinkorswim (Ameritrade).

We can reasonably time this bull market to correspond with the presidential cycle, so I might as a speculative play sell out of the money verticals. I’d make them expensive verticals, like on NDX for example, again to minimize transaction costs. The risk/reward would have to be pretty good. A good part about verticals is that a strong bull market would mean reduced volatility, and verticals are short volatility.

I might buy naked options on the SPX or NDX or RUT if the risk/reward is appealing. These could be the big money plays.

I might consider a triple weigted ETF like TNA but with a bull market, volatility might drop considerably, which means the daily readjustment of the ETF would be against holding long-term.

I will return to McClellan’s eurodollar fractal. It has had very strong predictive power recently, amid a financial environment of great uncertainty. His fractal predicts a very strong bull around June 4. The fractal is not so accurate about strength as it is with timing. Value blue chips would have the advantage of resale value if the necessary strength of the bull market is not sufficient for profitable options trading. This would be to suppose the possibility of a tepid bull, in which case the value of options can deteriorate through time decay, resulting in an unprofitable position even though the market is performing as anticipated.

I anticipate that for the short term the market will enter a holding period for the next 2-3 months with a downward bias. I am inclined to think there will be a downward retracement. My assessment here is based on seasonal patterns, presidential year patterns, and McClellan’s eurodollar fractal, which has proved to be somewhat prescient for the last year or so.

Based on McClellan’s eurodollar fractal, I anticipate a strong bull market starting probably early June. I will of course look for confirmation in the financial news. A primary catalyst will be, I anticipate, an exit of Greece from the Eurozone. This will cause short term panic and then a roaring bull market. I anticipate this because in March Greece has a debt payment due which it has no way to pay. Greece is a bit of a spoiler and the situation is difficult to predict because of the Europeans’ apparent inability to take decisive measures. Other news events might develop. The actual news itself is irrelevant except insofar as it confirms the Company’s timing predictions.

Our timing predictions are also based on contrarianism. There needs to be a bit of a retracement and enough retail investors getting really frustrated with their returns before the market can really move higher. A downward bias would cause institutions to sell, which could see strong selling and test of support. This would be healthy for a bull market. In the long term see a strong bull market Jun-Nov, and we are actually waiting to catch this. At the moment the Company is cash. We are considering placing iron condors on the market, but we see some possibility of a strong downward retest, so we judge volatility risk with iron condors to be high. Iron condors are short volatility.

Despite the carnage in premarket futures (caused mainly by anxiety over European debt) the market managed to regain most of the losses, which was fairly impressive. Many of the major indexes now have bullish hammer candlesticks, and all the indexes remain in consolidation at their current levels. This is all bullish. GE remains in consolidation and bounced right off its upward trendline. Bullish. I continue to expect an important top in the near future.

The Company is aggressively cutting expenses this Jan, which marks the start of our fiscal year. We’ve closed a London phone line (we still have our main London phone lines however), cancelled the WSJ and Morpheus, and switched IBD and FT subscriptions to Kindle which are much cheaper.

What we really need to do is switch brokers, because thinkorswim being bought out by Ameritrade has resulted in much higher commissions, which really hurts the bottom line. We plan to switch to Interactive Brokers. This involves a lot of paperwork with a company which is why we didn’t do it a long time ago. And we need to pay attention to filing corporate taxes in March. Our vice president has a degree in business and should be doing these things and let me, the CFO, concentrate on trading. However she is content to sit and collect her $1/year salary without lifting her pinky finger so it falls to me, and I have enough work to do, so I suspect we may be running with thinkorswim for a while longer. Also a problem here is that our corporate seal is in a safety deposit box in HSBC in Manila and so we can’t do anything until we return to Manila, which won’t be until June at least. So my problem for the last year has been making trades which minimize commissions, and this limits opportunities.

Here’s the bottom line. I have not once thought about hitting the sell button yet.

There are so many reasons not to like this rally. Which is why I like it. The Dow is going to surprise us all and rock in the new year.

The after hours futures are shooting up, and I’m not sure why.

The market internals are bullish and I suspect we may have an up January.

Both the Russell and Dow futures are butting their heads against strong resistance. A big breakout day on high volume would really confirm the uptrend, and that’s what it looks like on the futures.

Fear and panic over the European problem created great value in many blue chips, such as GE, AA, BAC, etc. This fear is now dissipating and money is starting to flow more.

A positive is the move in the Russell. The RUT has to lead a good rally.

Now we may encounter here a parabolic push and then selling, ie a fake breakout. This is why I would probably scale out about 50% of my GE position if we have a big up day.

I am still not back at my desk and have no idea what is happening in the world. This is all chart analysis.