Friday, February 06, 2009

Headbutt Short

Adjusting to market-neutral here today, as the market is taking me out of several shorts. I'm not yet back to enthusiastic about a further rally, but I can't leave my head on the platter at the same time; so I'm not going to fight this tape...

Beneath the surface there are some some interesting divergences, the key one being the that the VIX is not falling as we rally (suggesting more volatility ahead). Also, the put-to-call ratios are very low, but that indicator is not too big a deal until the 5-day and 10-day averages become extreme.

The fact that there is so much hope now (in that the market is portraying a brighter future 6-9 months out) suggests to me that we cannot call the top as easily as indicate that the cessation of the rally will end with a very quick slam back down.

We'll see if that day is not Monday when the Treasury comes out with their game-plan. If we don't sell on the news, I'll be back to net-long by Monday's end.

Current longs (according to size): AVAV, USO (new), ATHN, CEPH, RJI, FSLR (new), OTEX, HOC, CECO, ORLY, MYGN, ASEI (thin)
Current Shorts (according to size): TWM-long (Russell 2000 Ultrashort), HAS (reports Monday b4 open), MAT, HOTT

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