Friday, May 08, 2009

Lull in the Blows


There are multiple drivers today: The monthly employment report; wholesale inventories; MCD earnings; and your typical, garden-variety government yes-test.

If I'm aggressively short here, the market needs to be taking body shots, if not tanking. If I'm aggressively long, I just want to survive such a day without terrific drama and I need to see leadership names out-perform things like the DJIA; suggesting to me I'm in the right place.

Never short a boring market, right?

Never buy a market where leadership is lagging the Dow and SP500, right?

Why am I not on holiday?

Fine, the NDX continues to lag (something which continues to paint the intermediate-term as topping/toppy), but the action today is more boring than nasty and might now be improving (I'm hardly into my lunch-sack at this writing). Most indices are trading higher, commodities are further cruising and market breadth is significantly firm.

On the other hand, leadership growth remains unable to rally (continued negative tape action in leadership). On the heels of yesterday's high-volume distribution-day, whereby leadership fared much the worst, the leading industry groups on the day today continue to be the laggards, while today's worst performers are again the stronger ranking groups.

I did trade into MS short late yesterday and then got lucky as they announced a secondary offering after the close. WFC also announced a shot-gun offering. Both of these are fantastic shorts from here, below their respective offer prices (24 and 22); that means they are a bit off limits now. I covered the MS in the pre-mkt today under 25. I'm short the belly of the beast (GS), but nothing else at this point.

FAZ, GAZ or AZZ - none of those ride for free (I'm keeping away from aggressive financial shorts until that group develops better cracks). Why focus on shorting financial's when the NDX is where the laggards currently lie? I remain short AAPL, while trading in and out of NDX futures short (below).

I've added a couple of longs today, neutralizing my position some since blood is not seriously flowing. If leadership charts looked better I would be pushing long today. at the moment though action looks overall toppy and I'm okay with sitting mostly out, waiting for something to set-up. We may not do much more than consolidate for now. In that case I may as well keep things small.

Total Position: 1.36-to-1 net short, 34% invested

Currently Long (according to size): WNR (5.7%), STAR (new, 4%), DRI (new, 3.9%)

Currently Short (according to size):
AAPL (7.9%), GS (6.2%), STRA (5.3%), SRS-long (1.7%; US Real Est. Dbl-short)
(Note: inverse-ETF SRS represents being dbl-short the repective IYR index)

Futures Accounts: No current position - covered NDX June 1379.75 for further 15-point profit; Will look to re-enter next set-up - today's mkt internals were too positive not to cover futures on the hard slice downward. I prefer things perfect to hold futures.

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