Before market opened I talked about Fantastic Four (POT, MOS, MON and CF) and to keep an eye for bearish strategy. Here are the intraday trading results of the two bearish play I used for my intraday trading set-ups (POT and CF). Though these fell even further, but double digit gains for less than 1 day holding aren’t bad by any measure.

Few month’s back I had written about where we were headed and what were the key points. Those I still consider to be valid and something that my readers should be watchful. These are tough times and hence careful trading and due dilligence is of utmost importance.

Profitable Trading, OP

Ospraie, It took 8 years to reach where it was, one of the largest commodities fund. It took nearly (or less than) 8weeks for it to close! According to a news published on Reuters, Ospraie Management LP is shutting its flagship commodity hedge fund after losing 27% in August and almost 40% this year, according to a letter that the firm sent to investors on Tuesday.

Ospriae Fund Ltd., which had roughly $2.8 billion in assets at the start of August, is (was) one of the largest commodity hedge funds in the world. It’s down 38.59% so far this year; it plunged 27% in August on losses in energy, mining and natural resources equity holdings, making it one of the biggest ever closures of a commodities-focused hedge fund.

Dwight Anderson, founder of the firm, launched Ospraie Fund in February 2000 and generated annual returns of 15% until the end of 2007. The firm, one of the most influential in commodities markets, still manages more than $4 billion in assets, including $1.2 billion in a special opportunities fund. Lehman Brothers Holdings Inc. (LEH ) bought 20 % in the firm few years back (April 2005). Fast forward 3 years, Ospraie is closing down, and Lehman is on Sale (almost). The landscape is entirely different. This also serves a reminder that the past performance doesn’t mean future performance will be similar. And in today’s world, complacency has no place.

Since losses suffered by Ospraie Fund have exceeded 30%, investors don’t have to abide by its “lockup.” Lockups tie investors’ money into a fund for a specific period — usually between three months and a year. But the lockup provision for the Ospraie Fund disappears if losses top 30%, so this allows investors to pull their money more quickly.

The Fantastic fours (POT, MOS, CF and MON) are all weak, giving technical signals of bearish trends. I am not sure but it might be quite possible that other commodities funds are also strugling and want to get out of the these underlyings. These stocks had wonderful runs, and don’t be surprised if we continue to see downtrend for a while with dead cat bounces along the way.  

Profitable trading, OP

Here is what I mentioned about last Thursday rally to OPN subscribers before the market open last Friday, rest is history-

Overall volume was only 3.7 billion yesterday and upside volume was only 62.8% of up + down volume. Furthermore, breadth was very weak — this is a weak rally and I don’t buy into it….

What a day today! Huge up rally that lost half of steam by lunchtime already. S&P still couldn’t sustain it above 1,300, let’s see if it can by today’s close. The VIX didn’t give-up much even though we saw a big rally!! The only thing that comes to my mind, be very careful in this environment. I think somewhere ahead we will see a major panic selling to wash out the weak traders from the markets, value will emerge that will drive bulls mad. I am staying on sidelines and taking this time to learn about past recessions and screen list of the stocks that will make a major move once markets come back on track. Where is that bottom, I don’t know. But I think when it happens I hope to have a vague idea that a bottom is in place and how to benefit from that.

For OPNewsletter, after a rocking Aug’08 when it lost nearly 13%, first time ever in OPN’s history, we are up again +3.3% for September cycle. We have invested 38% of 10K capital and have 62%capital that can be employed should we see value emerging. I usually target to invest 60% of 10K.

China- According to Bloomberg, Ten of 11 Summer Olympics host nations analyzed by Morgan Stanley economist Stephen Jen saw growth and investment slump in the year following the games; the only exception in his study, which stretches back to 1956, was the U.S. in 1996. Government officials in China, whose expansion was already slowing before the Beijing games ended last month, are determined to avoid what Jen calls the “Olympic Curse.” China has already eased lending restrictions and halted an appreciation of the Yuan that was starting to pinch exports. Now, after four straight quarters of decelerating gross domestic product growth, the government is considering a fiscal stimulus of as much as 400 billion Yuan ($58 billion), according to economists and reports in domestic news media.

Australia- the commodity and natural resources kingdom’s central bank cut its benchmark interest rate for the first time in seven years amid signs the nation’s $1 trillion economy is slowing. Housing is slumping as well. The story isn’t different in many other key markets.

Do you smell deflation?

Profitable trading, OP