Thursday, February 12, 2009

Goosing Gravity

Pigs were flying today. Coiled tight like a wet rag, then goosed-up and put away lathered.

Whoa now!

I'm long again, having blown-out shorts in time to reap reasonable gains before the rally got serious, but I'm in only 3 names (below) and not sending any wedding invitations.

In fact I still intend to lean very hard short the moment we look like we're going to go back for (yet) another "test of support."

However, if this swing-higher today turns into a decent rally, I'll just keep letting out a larger line along the way up. I'm small and flexible for the moment, but not going to doubt a thing if elephants really can (again) fly.

It was indeed another news-driven yelp which started the rally, but not before we were staring down the precipice and threatening to break through the lows of the trading range; going back to the end of November. I was short and getting shorter before dodging horseflesh and running for cover. It was a lot like jumping out the window and running down the street with your pants down after daddy's rifle was suddenly pointing you in the face; less than totally fulfilling.

The good news for investors, the administration is working a new plan to address mortgage foreclosures (details later, naturally) by pumping (sugar-daddy) money into troubled homeowners and thereby stemming new foreclosures. Add to that the fact that we saw a near break of support which instead reversed explosively higher on strong, rising volume and you would say we are in for a rally now, naturally.

But let's wait to see more than a flash-panic-buy before swallowing any hooks.

The bad news for investors is that the pattern so far has been that every plan floated to save the economy is met with this sort of pimp-up higher, but then retrace, retrace, retrace.

Also bad, this plan is being floated by the same team which over-promised and undelivered, well just this past week (and that wasn't the first time). The devil is in the details and it has been the details whereby the market has lost its gumption previously. That might turn out different this time, as this may be more the proper-chord to chime. But this may instead be the set-up for a true demoralizing bull-defeat if the market should turn right back tomorrow and start gunning again for those lows...that will be ugly to watch (unless you're a wicked short seller), as the psyche of the bulls will be low, low and going lower.

I will get (wickedly) short quickly and aggressively if the market stalls-out tomorrow, whereas I will only gradually build a larger long-side position if the market can keep firm on the tape. In other words, I will believe the downside much quicker than I will be convinced any significant upside is indeed underway.

Gravity is easier to believe than elephants flying, right? At least for the time being.

Final note, many Elliott Wave riders here are not covering a single share, but instead sitting on their hands with both ass cheeks (i.e. holding short) while expecting a 3-of-3 doom-wave to commence momentarily. Click on this link to see what I mean.

Ride on - either way.

Current longs (according to size): AVAV, ATHN, CEPH (reported tonight, after close; I will sell tomorrow if it is not higher on the news)

1 comment:

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