Classically Trained, for the Revolution

Wednesday, September 23, 2009

Bearspring!


Bountiful images aside, I'm going to make this as boring as possible.

Candles did glow red late in the day after all and the market reversed lower on reasonable, rising volume; an outside reversal and clear distribution day, the first of either in some time.

Let's discuss some (boring negatives):

-Oil and most commodities were down again and this was true for all the day. Cramer came on at one point late (just before the market peaked) and made the argument that the stock market was finally de-coupling from the movement in oil prices. That was true today, but only up to the moment that he mentioned it. I suspect tonight Cramer will find a was to take credit for today's pullback now, but who cares about that? He can take credit for his own birth - I won't mind.

-Shanghai has been down all week. Small GDP-economy or not, this is where a lot of the growth is and partly why US Mainstreet has no idea how a stock market can be so good when things are obviously so bad out there (out there, in their minds, is not far enough out the window perhaps, as emerging markets have been fueling growth, while domestically, only cost-cutting has been adding much to bottom-lines).

-The Baltic Dry index has been down for some weeks now; well enough off the highs to make a negative impression.

-Trish, I mentioned earlier, today asked a pro when and not if the Dow would reach 10,000. I have said many times to listen to Trish. You think I am crazy, but you don't know Trish the way I know Trish. Trish is a sentiment composite; she's a peach.


But before you bears go crazy with excitement, there are positives:

-We were still making new highs in indices and in key stocks as late as, well today. Leadership has yet to do anything but lead on the upside, not down.

-There are a ton of stock offerings coming this week and many of them have the Goldman/Morgan Stanley name on them. I cannot recall a week with big offerings where the market had a substantial sell-off. Big firms with big sell buttons want nothing of a panic when they are trying to distribute such quantity of stock. Hands-off the sell buttons right now would be the company line...let's see what happens.

-Fervor, yep fervor today now on the message boards, as bears finally have something to high-five about. And I have to say, it reminds me of someone finally getting a big win at the race-track and shouting with way-too-much vigor. Sorry, but this is what a long-term loser sounds like when he eventually nails an exacta. Bears should not over-celebrate a small victory here. Bears should be keen for either of three possibilities now and respond accordingly. Hope is not a trading strategy.

-A small pullback here would be a nice positive, assuming it doesn't deteriorate with accelerating force each day. Letting off a little steam, without that acceleration, would be a bullish set-up. If we see accelerating force, then respond accordingly - naturally.


That's as boring as I can make it for such an exciting day. I sold stocks with abandon in the last hour today - but that is less about what I might think and more about what I do (accelerate exposure going up and manage risk, if not change sides, going down).

I don't even want to know what I actually think about any of it.

I went from 13 to 8 names long today and I reduced several of those remaining. Here is how it looks here going into Thursday...

-Total Position: Aprox. 1.5-to-1 net-long (down from 4.3-to-1), considering levered SKF and under-levered UUP hedges.
-56% invested
overall (down from 84).
-Pure-longs = 35% (down from 65).


Currently Long (according to size): SNDA (5.5%), EBIX (5.3%), DGW (4.9%), CLW (5%), CYOU (4.2%), TQNT (3.9%), CFSG (3.8%), ULTA (3.4%)

Currently Short (according to size):
-UUP-long (12.1%); current inverse correlation with equity mkts defines this as an equity hedge
-SKF-long (US Financials Dbl-short; (7.9% position)
(Note: inverse-ETFs SKF and TWM represents being dbl-short their respective index).

Futures Accounts: no position

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