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.