Wednesday, August 26, 2009

Gold bugs about to get Squashed

Anyone who follows me knows that since the beginning of the year, I have been saying - "Sell your Gold, it's dead money". Even Dentists know better, and don't even use Gold to fill cavities anymore (Though their pound the table buy Gold advise when I get my teeth drilled recently is an excellent contra-indicator).

If you insist on being a Gold bug, at least understand what your talking about. Why are you buying Gold (other than the relentless 24x7 commercials and Glenn Beck telling you to)? Everyone I talk to who is long gold explains to me it is all about the upcoming hyperinflation we will experience. Get it straight...Inflation is not the threat, DEFLATION is.

First, let's chat about inflation, most think of inflation as an increase in the price of Goods or services. The most common measurement of inflation for an average consumer is the Consumer Price Index (CPI), and for business Producer Price Index (PPI). OK, while I disagree that this is the cause of inflation, since most look at CPI, and PPI - let's break these down.

CPI Is weighted this way:

Housing: 41.4%
Food and Beverage: 17.4%
Transport: 17.0%
Medical Care: 6.9%
Other: 6.9%
Apparel: 6.0%
Entertainment: 4.4%.

Forget that every fast food restaurant is all about the $1 meal, look instead at what REALLY makes up the CPI - Housing. Housing accounts for over 41% of the entire CPI index. After housing prices (and subsequently rental prices) have been completely decimated, do you really see them going anywhere, let alone parabolic??

How about transportation? We all know that in the 1960's a nice car would cost at least $2000. Forget about that $250,000 Bentley convertible and instead focus on the recently launched Tata motors $2000 vehicle. Sound inflationary? How about TV's?? In 1949, it would have cost you a sweet $600 for a 16 inch TV. Last year, I could buy a 50" flatscreen at Costco for a little over $2000 (down from $6000 the year before). While in Costco last week, I noted their offering of a 50" flatscreen for $800.

Regarding PPI, unerstand that when an industry is a wash in money, there are too many competitors. I have noted that over the past few decades, anytime there are more than 3 competitors in a space, they tend to compete for market share, and not margins (Witness the PC industry over the past decade as IBM subsequently threw in the towel, or perhaps the ' Big 3 Auto makers). When margins be damned, companies do not raise prices (PPI = PRICING POWER), they CUT prices ... subsequantly commoditizing their product space.

You can not fight productivity, and commodization of product cycles. The facts support my argument, in every asset class, prices go down, have gone down, and will continue to go down. If you do not believe me, simply look at the TIPS which are telling you there will be NO inflation for years to come.

Now people who actually have a clue about inflation will tell you that it is not the cost of goods that cause inflation, it is the amount of money. Well...yes, and no. Though it is true that too much money going into any one asset class is what truly causes inflation, the inverse case (as a result of said productivity and competition) can also be made.

So in summary, yes I recognize that the Treasury is printing dollars like they are going out of style, but look at the 'asset class' they are being spent on. - They're not - the reality is that the Fed is throwing all these newly printed dollars at the banking system in a desperate attempt to recapitalize it. Just because the banks have all those new dollars, it does not mean that the world will ever see them. Unless these newly minted bills suddenly find their way into the economy (AND in to a very concentrated asset class), expect deflation to continue to be the world's issue, not inflation.

You can holler at me on Twitter here.

PS -PLEASE do not tell me about paying $4 per gallon for gas or the mortgage payment on your villa in France.

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If a Bear Growls in the Woods would anyone hear him?

If you have been following my on my blogs, or Stocktwits you would know I am not a bear or a bull. I trade off combination's of micro and macro factors. I went "all in" back in March, and was 300% invested in the bank stocks for the entire month. I remained fully invested the following months playing themes such as China and Solars. In late May I went long 3x Inverse ETFs (shorts), and killed it short as well. In mid August I started putting on short hedges against my long beta. Fast forward to earlier this week, and you would see that for the first time since the March bottom, I have liquidated 95% of my long positions (in all three accounts that I manage). This is a sea change for me, and here are the reasons why;

If you have followed any of my charts, note that as earlier stated we are at inflection points in many major averages. As examples of inflection points, I would suggest you look at daily's of the QQQQ and SPY indexes. QQQQ's are at a 50% retracement level of it's highs - and 38.2 retracement for the SPY. We actually have gotten by some of these important points just enough to get bullish... And just as a few weeks ago, everyone was calling for a 10% correction - now all I hear is 'next stop' is Dow 10000, or SPX 1200 etc.

The past few days have shown a lot of Dojis. You can Google that, but in layman's terms, a Doji is a reversal day - where price gets rejected and markets subsequently close unchanged. This makes me think back to Ralph Block (Technical analyst when I worked at Raymond James), who used to say "Volatility is the precursor to a change in trend.

Cash held by professional money managers (the *wink* smart money) is at lows not seen since September 08 (we know what happened shortly after that).

Look what is moving in the market... AIG, Fannie May, Fredie Mac making stupid moves (the junk of the junk) All these little biotechnology stocks are having 'goofy' upside moves. Yesterday, the deciding factor (for me to sell everything) was a little penny stock I owned, Vonage whose stock price rose over 300% in two days. This is all late rally price action.

Short interest is at multi year lows. Put call ratio is also painting a bearish picture, with more than 50% more calls being purchased on CBOE.

How about China, whose insatiable appetite for every commodity has mostly driven this entire boom? China Aluminum (the state run Aluminum co for China) came out last night and stated "We have enough oversuply that will take three years to work off".

We are just starting massive weekly bond auctions, that will require China et al to increase their appetite for US bonds by 10x just to absorb the excess supply. Let's see how these go.

The number of stocks trading above than their own 10 week Moving Average, on the New York Stock Exchange (NYSE) is almost 88%. That is the highest level since this data has been collected dating back to 1994 and indicates an extreme overbought condition.

We are now concluding Q2 earnings season - The last time I was net short (late May) was just after earnings season ended...recall how those following weeks went for the stock market (down).

And the biggie is the US Dollar ... The Dollar looks like it had a reversal day, and has put in a bottom (If you follow my Tweets you know I heart the dollar now). If the dollar breaks out (which it looks like it is), look for this Oil and Commodity based bull market to reverse.

I will add more reasons as I am able, but these are a few that should give you caution.

Chat with me on Twitter here

Saturday, August 22, 2009

Smartphone's are the NEW PC

I am reading an interesting factoid today over on Alley Insider's, Business Insider. The chart talks about why Dell, Microsoft and others are making a push into the Smartphone market (see my July post on the 'bigger picture').

While the article is correct in pointing to the fact that the Smart phone market will eclipse PC sales in the next few years it misses a much bigger point in my opinion. Not only will Smart phones eclipse PCs (and Laptops) in sales, they will BECOME our next generation of PCs & Laptops.

That means that should Dell et al not be in the Smart phone market, they will be gone in 10 years. Be open minded here, as there is a convergence of technological trends that support this thesis. There is Moore's law (Think faster, cheaper but mostly smaller). There is the advent of 4G and 'Next Gen' wireless networks - eventually able to transport Terabytes of High Definition content wirelessly.

So within 10 years, I expect that as I enter (as examples) my car, or my living room - a dumb terminal or dock will 'talk' to my Smart phone, which will get its content via the Internet. This will be a very disruptive confluence with major implications. As all my content gets streamed via the Internet, it will no longer just be about CBS, NBC, ABC and cable stations such as CNBC - but it will also be about Stocktwits.TV. Since my new pipe will be the Internet itself, this will post a major threat to the Cable companies themselves. After all, if I have a wireless broadband pipe, why would I need to be tethered via Coax? For my home computer (or business), I simply need have my smartphone within range of a monitor, and keyboard - and I have everything I need that used to require a Desktop PC.

Skeptical? We're already starting to see the beginnings of disruptive technologies that a few years ago didn't even exist. Take for example an Apple Itouch (NOT the IPhone mind you, but the ITouch). By combining an ITouch with Skype software, and a wireless service such as MiFi, one no longer needs a cellular phone service, nor a cellphone.

Companies like TomTom recognize this disruption, and have already begun to 'eat there own lunch. It was just a few brief years ago that TomTom went public, and was a huge success selling GPS hardware. This year almost the entirety of their growth and future revenue will come from a software application that runs their GPS on an Iphone platform.

Keep your eyes open as technology moves forward, for every year it moves forward faster. The resulting convergences are ever increasingly revolutionary, not just evolutionary. If as a business (or investor that needs to watch this) you don't eat your own lunch, someone else will.

You can discuss this further with me here - I am @A_F on Twitter.
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Friday, August 21, 2009

@Alphatrends is WRONG!

I learned to make provocative headlines from a good friend of mine (you know who you are Brian :-) ) ... But it's a little bit true ... Brian ( @alphatrends) is wrong when he keeps saying "Only PRICE pays". It never bothered me when only he tweeted it, but more and more recently I see others stealing the quote.

I am actually surprised at Brian, because he likely learned it with me in the 80's from our Lehman Brothers days (Brian still has all the scripts!) ...and as a reminder, the actual phrase/quote is;

Only Price AND Timing pays ... Case being, if you own Gold (as example) from 6 months ago at 950 - you might ULTIMATELY be correct on the price, but if you owned it for 6 months you have been in at best ' dead money'.

So Brian (and others) - get it right... Only Price and Timing pays :-)


10 % !!! What to do

For the past month, actually ALL of August I have heard no phrase more ;

"The market is overbought...I expect a 10% correction...then we can go higher."

After 20+ years professionally in this market, if there is one thing I DO know to be true - If EVERYONE is saying it ...aint gonna happen. So while a pullback will come at some point, rest assured - it aint yet, and it aint 10%.

On a similar note .... (when everyone is saying it), when everyone is in a 'crowded trade', those don't work either. Can you say Natural gas...Solars....Ultra Short Treasuries or *gulp* even Gold? ...think about it.

Holler at me - I am @A_F on Twitter

Wednesday, August 12, 2009

Don't Blame Leveraged ETF's

There has been a lot of talk (more & more) about banning Leveraged ETF's (LETFS) lately. This bothers me as it is like saying ban options since the majority of options traders loose money. I say don't blame the leveraged ETF's if they implode your account, blame bad trade management and discipline. This post is about how I use leveraged ETF's to hedge my portfolios.

I do not short individual stocks because I trade mostly in accounts that do not allow for that. Having run a Long / Short hedge fund, I have grown accustomed to being able to hedge. For me, the LETFS allow for that in almost a perfect fashion (Yes I am aware of their leakage AND YOU SHOULD BE AS WELL).

I find that a weighting of between 10%-30% LEFTS against the remaining portfolio in HIGH BETA stocks has worked like a charm for me. It is fun to watch the transition intraday especially on turn (non-trend) days in the market. First I watch my portfolio value turn red as the market sells off, but then *bingo* it turns green again should the market sell off significantly.

This sort of hedging is my preference for a few reasons. Firstly, I am more of a trend trader, than a day trader. I scale in to a position over a period of weeks, and scale out accordingly. Though I do use trading stops, the LETFs allow for me to stay in a stock if IT looks technically ok, but perhaps the overall market does not.

Another reason I like the ETFs hedging is that we are currently at an inflection point in the markets. I (and likely you) could easily make both a bull case, or a bear case from these levels (S&P 1000). So while I used the LETFs back in March to make a leveraged directional BULL bet on the banks (300% + return on FAS), I am now mostly using them as a short hedge. If you have followed me on Stocktwits, you will note that I have been entering the LETF shorts in the past two weeks for the first time aggressively since May 2009. I do not do this blind, and I have been stopped out on more than one occasion recently. If you DO follow my Stocktweets, it is important that you know that although I might be short term bearish, I am still long VERY high beta stocks currently - and am still a longer term bull.

Happy trading - @A_F
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Tuesday, July 28, 2009

'If you knew Retail like I knew Retail ...."

OK, I get it...the consumer is dead...retail is dead...whe're all gonna burn and die and go to hell. But before you go short the RTH (Retail holder ETF) you should understand what drives retail - and it is not just consumer consumption....

I have had the luxury of owning, or working in DOZENS of totally different industries in my 30 year professional life (do NOT date me). One of the benefits is to understand the dynamics of what drives an industry - Trust me, it is a different perspective than the same old recent headline that retail is dead.

It was the late seventies, and fresh out of school, I joined my brother and we started a retail clothing store. We rented space in Roxbury Massachusetts (the ghetto) because rent was dirt cheap. Ultimately after making many mistakes, and learning along the way, we determined we would have more success being a specialty retailer operating in a 'closed area' (neighborhood not mall). So we jettisoned Junior and Missy and became a plus size store for *gulp* FAT* women. It was the perfect strategy- after all our then racist view was that 'women of color' ate a lot of fried chicken- thus lots of fatties in the ghetto - Fat women were less likely to steal (only the ultra skinny crack whores were stealing to pay for their habits), and our only competition - Lane Bryant would never have the balls to open a store in the ghetto. Well as wrongly bigoted as we were, we thrived, and subsequently expanded the chain to over a dozen stores (I subsequently sold my interest when I met my wife and went to work for Lehman Brothers in New York City).

So while it is easy to just make the statement that retail is dead, it is actually more complex than that. The first thing I will share with you is in my opinion, the most important;

Retailers make their money by 'inventory turns'... (huh?) Think of it this way... In Retail, you are buying your inventory using other peoples money...You order the goods...They get delivered, and then you have either 'net 30,net 60 or net 90' day terms to pay for them depending on your credit status. So what is making retailing so attractive, is that you are using 'other peoples money'. As a result, he more times you are able to turn your inventory over, the more money you will make.

Now do NOT get me wrong, I believe that we are in a decade of retail where there are just too many doors (too many stores competing for the same dollar) . But just as I make a case for the IYR (Commercial RealEstate Index) in my previous post - the same economic logic applies to the RTH. Our economic debacle will wipe out the week sisters ... Johny retailer who has not ordered LEAN is GONE. For that matter, even public companies that do not have excellent balance sheets will be gone.

Should CIT go bankrupt this will actually HELP the RTH index...why? First, understand what function CIT provides. I know that S&P reports describe them as providing credit to small business - but let's translate that into English. If you are a small mom & pop retailer a wholesaler will NOT ship good to you unless one of two things take place;

1) You pay cash up front (NOT they way a retailer will survive - remember retail makes money using OTHER peoples money).

2) You order your goods through a 'factor' such as CIT, where CIT pays the wholesaler, and jacks up the price to the retailer, effectively becoming the middleman.

You need to think 'big-pic' here...who does this help/hurt the most? Johnny Retailer is the one who will loose here... Remember the nationals have access to the capital markets, and thus can finance their inventories via banks till the smoke clears... all the while, Johnny Retail can NOT , and eventually closes his doors - hence removing one of those many extra doors that exists today.

Macro thesis number two for retailers is that if you are a national (or even strong regional) chain, you are in a position to re-negotiate your lease. From my retail days, I can recall signing a 2 year - with a 10 year option that I desperately wanted out of when I realized the location (college town) just wasn't working for my type of biz. Outcome? I sold it as a sub-lease to a jewelry store that actually PAID me $50k to assume my lease! The same thesis works in reverse for retailers of clout when dealing with landlords. Make no mistake about it, if the Limited is hurting, one phone call to Simon properties cuts one of their largest expenses by 30%!

Most publicly traded retailers also do a build-out over years...thus leases come up for renewal every not think that every lease is automatically renewable at the same time (this works for them, and against them but is ultimately neutral for most).

Last point I will make is that aside from the biggest factors affecting retailers...ability to run lean inventories...negotiate leases.... Look at their workforces... Now more often than that, the MAJORITY of the workforce is part time ...a MUCH smaller expense dollar for dollar than a full time employee...

In summation Retail is no different than any business in this economy...there was (AND IS) a lot of fat that could be cut... and that is what we are seeing. When you cut fat, you see a surprisingly bigger 'E' in the P/E' of corporate America and this is why I am a bull...

Debate me on Stocktwits .... I am @A_F

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Commercial Real Estate - The New Black

2o many shorts continue to salivate over the upcoming Trillion dollar implosion of the commercial real estate market. After all - Who is renting all the vacate millions of NEW Square feet coming to market. For that matter, who will rent all the soon to be vacant existing square footage? Of course we all know that since the consumer is dead, retailers will start closing doors en mass, creating an even bigger tsunami for CRE, right? Today alone, Bank of America announced the closing of a whopping 10% of all their bank branches. We will likely not see un-occupied rates peak before 20% (in major metro markets)...still a ways off. Lastly, if you're a landlord, how are you rolling over those trillions in debt coming due, when financing has all but tried up for CRE??

Before you start getting short the IYR (The CRE ETF), or heaven forbid going long the SRS (2x short of IYR index) at least understand the underlying dynamics here;

1) Your first tell should be that the IYR is currently in the 30's ...down from a high in the eighties. Even if your thesis is that the average piece of commercial real estate will see it's cash flow, value, etc cut in half consider that IYR's price already KNOWS that...remember the stock market has an excellent track record of looking ahead.

2) Consider that the IYR is not made up of your typical local real estate yuppie investor, over-leveraged, overly greedy, and unable to refi. The IYR is instead made up of very LIQUID PUBLICLY TRADED COMPANIES ( Simon Property Group,Boston Properties, Public Storage, Vornado Realty, Annaly Capital by themselves represent over 30% of the IYR index - ALL strong franchises and easily able to raise funds as needed, or wanted.)

3) Consider that should the bulk of these companies be not able to refi, the group as a whole would likely be classified as a 'catastrophic' asset class (Think BACKSTOPPED), eligible for everything the Obama administration has afforded the other banking institutions.

4) Lastly, for those locked out of the credit market that are over levered, and likely mom and pop regional guys NOT represented by the IYR consider the following; These larger IYR component companies will benefit by buying Johnny Local's properties on the cheap. Debate me on Stocktwits? I am @A_F

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The Consumer is Dead - Long live the Consumer

When I was young, I worked in Roxbury Massachusetts. For anyone who knows Roxbury, it is a Ghetto. I still to this day recall ALL the brand new Cadillacs parked in the driveways of all these run down 'shacks', and in the parking lots of the low income housing projects.

Some parts of our human nature have not changed. Just as that generation sacrificed living in a good home in order to drive a brand new Cadillac - the consumer of today still drink their Iced Chai Lattes, even as they live on the streets.

In this post, I want to explain just some of the ways that the *new* consumer 'Cheats'. These are a few reasons why the consumer is still alive and well even in the face of 15% + (Actual) unemployment.

1) Take an example of the average Joe in a $300k home that has just been forclosed on. Where he likely had been paying a $3000 per month mortgage, he is now more likely paying $1500 a month in rent. Most of that $1500 difference is disposable income. Likely, some pays down the debt he did not default on, and the rest goes to buy a new flat screen TV, or Starbucks coffee habit.

2) Jr. moves back with his parents. Now junior might not be buying a new flatscreen to use with his new Xbox360, but since mom and dad are paying his biggest expense (rent) - ANY income is free and clear to feed his bar and restaurant bills.

3) Don't want to move back in with the parents (or more than likely they don't want you)? Just cash the monthly check that they send to you...after all, mom and dad's of the largest populous (baby boomers) are largely retired, and likely have 100's of thousands, or millions in mutual funds, 2nd homes etc. They LIVE to give to their children.

4) Speaking of demographics, many of those baby boomer's parents are at that ripe old age where one dies. All that inheritance money can go a long way.

5) Laid off? Credit shut-off? Time to pick at those six figure 401k's and IRA's. Doesn't matter that there is an early withdrawal penalty - after all we have been taught to consume for many decades.

Old habits don't die fast, they play out over time. I am not saying this is a healthy, nor a sustainable method for consumption. But just like in that Ghetto, people will want to look good, want to consume at any cost. The aforementioned is just some of the methods being used now days.

I am @A_F on Stocktwits should you want to follow or just "@" me.

Tuesday, July 14, 2009

Look at the BIG picture

If you follow Macro trends, there still can be a case made for being a 'Buy & Hold' investor. So while we see 30 point swings in stocks like APPL, RIMM, AMZN et al - Do NOT take your eyes off the big picture. A few examples follow...

Who will win the Smart Phone race - Apple? Rimm? PAAALLLM? - There are currently over 1 Billion cell phones worldwide, and the Market is expected to grow to over 3 Billion cell phones in just the next few years. Of these current 1 Billion phones, only 100 Million are 'Smart Phones'. So who will win? Me thinks there is room for more than one player in this space, and longer term, all three of the aforementioned stocks will be winners.

Who will win in the search space - Google? Microsoft? Yahoo? - Google currently controls a whopping 69% of online ad spend. BUT only 7.5% of all advertising is currently spent online. While this number only represents (only said tongue and cheek) 25 billion today, by 2011 this will double to 50 billion dollars, as 15% of ad dollars are spent online. So who will win? Me thinks there is room for more than one player in this space, and longer term, all three of the aforementioned stocks will be winners.

LOOK AT THE BIG PICTURE and start thinking of investment returns in 1000's %, and not 30 points here and there.

*disclaimer - I am a short term trader, and hold NOTHING long term. The aforementioned advice is intended for people who DO hold quality market leaders, in growing markets - to help keep this stock market in perspective.

Market at Pivotal Point

When I first mentioned (weeks ago) that many chart patterns were starting to look like they were forming potential Head & Shoulders patterns - I hadn't seen them mentioned by anyone. I was really feeling good about getting short. Fast forward to a week ago, and you can not escape EVERYONE talking about these H&S setups. With so many people watching the same thing, can shorting the indexes possibly work out? For now, I think not, and am mostly long the market again (albeit I go long and short on a daily trading basis).

Regardless of what I think today, I can not help but feel like we are currently in 'no-mans land', with no clear market direction in my sights. So what am I watching as my market tell? Not Goldman Sachs earnings, not even Intels earnings (which I believe will be taken positively). I am watching Oil as my market tell. If Oil closes difinatively under $60, I believe we will have more downside in the market, and will likely get heavily short again. Should oil close over $62 I think the bulls will be back in control.

Friday, May 22, 2009

Weekly Market Update

Note - If you want to follow my sentiment on a daily basis, you can follow me on Stocktwits, where I "Tweet" my actual trades.  

I posted late in April that this rally was getting long in the tooth.  Moving to a more cautious near term stance, I started peeling off long positions and more recently in the past two weeks started short positions using various leveraged short ETF's.  As of today, I now hold no short positions, and am 60% long, 40% in cash.

While I believe the market might "chop" around for another week, I believe we are still in a bull market.  My conviction is even more bullish every day that I hear the following two phrases on CNBC;

1) 'Sell in May, and go away.'

2) 'Bear Market Rally'

It does not matter whether this rally is short covering, or China optimism or whatever.  The more important factor is that it is a rally.  My guess is that this is simply liquidity, and money managers caught under invested.  Regardless 'If it smells like a bull...' remains are stance.

You can follow my daily trading on Stocktwits here. Or learn more about my background here.

Nat. Gas VS. OIL a tale of two tapes

"$UNG Nat gas is a TELL on just how pathetic our eonomy is $OIL is a tell own how pathetic the $ is  (From an earlier Tweet).  

Make no mistake about what these two DIFFERANT commodities are telling us.  Oil is not going up because things are getting better in the economy.  Quite the contrary, Oil is going up because commodities are priced in US Dollars.  Oil is a "tell" on just how bad the dollar is.

If you want to see a better view of our economy, consider looking at Natural gas.  While Oil is up over 30% YTD, Nat Gas is down over 30%.

Unlike oil, which is transported and shipped world wide, Nat Gas tends to be produced and consumed locally.  So in the US, we produce 100% of our Nat Gas domestically, and for our own consumption.

This by itself should not totally dispell the "Green Shoots" rally that we are seeing, but for me it is one of the key 'tells' that I use to tell me that the economy is creeping along the bottom at best.

Learn more about @A_F here

Thursday, May 7, 2009

Secondaries are the *new* Hot IPO's

Because I am more of a swing trader, I do not post on this blog daily.  There has not been a lot to say (at least that I can add any intelligence to).  We pounded the table, and went long the Bank stocks back in early March (right at the bottom).  We stayed long the market over the past two months.  We started 'peeling' out of our longs this past week.  Lastly, we started getting 'net' short the past few days.  Why did we get net short?  As per our previous blog post, we were looking for a "blow off" day.  While, I did not see it in the broader market, the action in the financials was all telling.

As of today's close, I closed out my short positions (had been levered short via FAZ,SRS and TZA 3x ETF's).  I have a very small position left long (JASO,CYOU and a hand full of pennies not worth mentioning).

The market is now closed for the day, and after the close, we find some high profile 'Tarp' banks announcing secondaries.  DO NOT FEAR THESE SECONDARIES - As they are the *New* Hot IPO's.  Point being, do not fear being long bank stocks over the next coming weeks.  I still see the XLF hitting my eventual target of 14.  Perhaps cleaning up these over levered balance sheets will bring us one step closer to my target.

What am I doing next?  I expect (hope) that the futures give us an up market tomorrow.  I will play it the same way I played today.  Levered shorts into a gap open.  I will be using today's highs as my stops.  Though I do not think we are at the start of anything big to the downside (the market never makes it that easy), I think today's action was shot #1 across the bow.

Happy trading.

Friday, April 24, 2009

Short Term Top coming?

Back in mid April we blogged about why all that $4 Trillion in cash on the sidelines will NOT get their 20% pullback to put it to work. We blogged that the only way we would see that trend change is on a "blow-off" type day when things go parabolic... Possible catalysts?  LOT's of Treasury supply coming to market next week...If bid  to  cover is not 3:1 or better could send nervous signals throughout the markets.  We are almost through earnings more near term catalysts?   Bank stress test results get leaked?  Material Dollar weakness?  Or perhaps as simple as major indexes butting up against their 200 dma. Perhaps we are here (I just picked two random proxies) :

You can learn more about my background here.

Thursday, April 16, 2009

If it smells like a bull...

Though we might say "Sell in May and go away" - right now you gotta be a bull!

Forget about fundamentals (yes they are improving, or at least not getting worse). Forget about technicals (They are great and we are fully in gear).

So what will be MY tell? There is almost 4 TRILLION of cash sitting on the sidelines - and Managers are waiting for a 20% decline to put it to work...and that is why we will not see a 20% decline. What we will see first is a "BLOW OFF" top as these guys realize the boat left the dock and they're not on board. I expect that within the next few weeks we will see the market up 500 in one day...That will be a good time to take some chips off the table.

Follow my StockGawks on Twitter , or learn more about my background here.