Monday, April 06, 2009

What's Black and White and Walked All Over?

The market firmed in the final 90 minutes today, though it did not manage to reverse.

What it did do is manage to sink the hopes of the bears; yet again.

This may be significant, but I'm less inclined to view it as a great positive for the market at this particular moment. I saw despair from bears today and I saw giddy awe from the bulls; meanwhile, it was a negative day for stocks overall, even if volume was lower on the decline; few leadership stocks are making new highs and it is a rare day that leading groups are not eclipsed by more beaten-down uglies making up ground.

Also (perhaps) relevant, some of the more popular, front-running bear voices were covering early today, which frankly makes me wonder. Not that it was a bad move - but if you are going to endure this length of pain, have your head slowly pulled from sockets as the counterblast ever endures, then how on Mars can you cover when it finally turns your general direction?

That psychology concerns me. Not to mention the increasingly glistening boilhead glee and salivating spray spewing forth from Cramer's mouth these days; as he credits himself for the greatest bull call since Freud discovered the ego.

If you're not following me, I'm on guard now for any sign of failure. The 4-week tally ended Friday was in fact the greatest Dow move since 1933; and the greatest 4-week upside ever for the Nasdaq. While that sounds like tremendous strength it is unfortunately (or not) indicative of a bear market rally. Study the greatest gains in short periods of times and you'll see a vast majority take place within a bear market; whereas the beginning of a new, secular bull markets begin with a generally calmer advance.

Anyhow, this is not a bearish call (not yet at least). My style is to adjust to the market and respect the intermediate trend until that trend has confirmed a change. Fortunately I'm an idiot, which can save a lot of money.

As such (an idiot) I re-adjusted the second half of the session and eased right back into a net-long stance. If the tape is positive tomorrow, then I will let go my remaining TWM hedge and consider covering shorts and/or adding to longs.

If I see further toppy action however, I am going to shift neutral asap and progressively shorten my stance as much as negative action dictates. Cramer can only inflate so much before he pops. I don't wish to share in that guy's pain as he swallows the last of his own Koolaide.

Oh, in spite of the late show of strength today, I did short 6% chunks of AAPL at 118.74; as that former-leader met-up with its 200-day m.a. late today. I have contended for some weeks the potential that the Nasdaq and AAPL may top when the latter retraces back to its long-term moving average. It's been more of a post-it than a bold call, but nowhere in my mind will I be surprised if it does indeed play out that way. This is more of a core-position short (as opposed to a simple hedge); I may be early and I will not hold on this attempt very long if it can keep above the 200-day (currently 118.47); but ultimately I am looking to short this aggressively as the stock fails from this general level. I'll wait until I know the position is working before elaborating why (I have fundamental arguments, but so far this shot is based merely on the technical key-average).

Regarding the updated list of eligible shorts, I will do my best to get that out tonight, but it may not be until very late, or even closer to the open tomorrow.

Total Position: 2.8-to-1 net long, 85% invested

Currently Long (according to size): PMCS, TSYS, MNRO, WNR, ARST, NFLX, CHKP, LFT, RJI, MYGN, DIOD, CYOU (new), DRI

Currently Short (according to size): TWM-long (Russell-2k Dbl-short), GE, AAPL, EGO
(Note: inverse-ETF TWM represents being dbl-short the respective index)

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