Saturday, April 30, 2011

Developments on the Psychological Tape (take heed or be headed)

I don't have much time and I don't blog much anymore, but since my current-best Super Secret (SS) psychological indicator triggered late Friday, I figure I owe you at least the courtesy to mention it.


How much does this matter? None I hope - I like a roaring market as much as anyone. But as these machines gain furiously on the heels of my human mind, I don't attempt to play every set-up. Instead I look for set-ups I know I can trade and get out of those I'm less sure of. There are times, mathematically speaking, where I do accounts a great justice simply by identifying when might be a good time to back-off and let the rest of the crowd make all that money. Ease-up on the accelerator and hover the foot above the brake pedal; determine then whether or not to begin braking.

How significant is this negative indicator I'm alluding to? Well, we don't yet know and in fact news broke very soon after which might explain why the emotional octaves of SS Scott W. triggered as they did during the last trading hour of an otherwise fabulous week. After Friday's close, news broke that Erin Burnett is being hired away (to CNN from CNBC). This story, developing behind the scenes at CNBC, may possibly be behind what excited our special agent enough to induce a signal; perhaps it would not have triggered otherwise.

No matter - if the sky might fall and you've been warned, it is best not to stand directly under the sky. I will trade off of a signal from Mr. W. until he stops being Mr. W. They come few and far between these days, but that is the nature of elegance (harmonious, brilliant, fleeting).

As for the exit of Erin B., I can only say thanks - as in thank god! She never once gave me something to trade off and the cumulative debris in my headpan is forever reeling from the extended overdose regarding the sound of her voice.

I cut long-only exposure from 85% to under 50% and I'm on guard to hedge-off remaining longs should Monday's action warrant it (Monday's and the first day of the month have been notably strong for some months now. Thus it will be easy to determine if the strength of the market is truly suspect. Anything less than a broad rally will have me responding in kind and hedging).

Inversely speaking, here is what SS Scott W. has foretold (yelled-out actually) for the near future:

1. The US Dollar is set to bounce
2. The US Stock Market is set to pullback
3. The Silver market is poised to decline
4. Institutional Money will be net-sellers of equities prior to the conclusion of QE2 (end of June)
5. What Everyone owns is not worth owning (at least not once SS Scott is announcing why they own it, excitedly and loudly).

Laugh, scoff, spit if you please, but push the Dollar short and Stocks long right now at your own peril. Again, it doesn't matter if fading this man turns out to be a good idea or not. I don't need to squeeze every dollar out of the markets - but by avoiding the big set-backs I maintain a mathematical edge against the rest of the players in the long run.

I scrambled and began selling stocks abruptly, but I resisted neutralizing altogether, as 1st Monday's of the month have been a major edge. Meanwhile, getting net-short at this stage, even if we see a weakening market Monday, would be a little premature for my point of view. This is not a bearish market call and I'm not so young or heroic as to short a runaway bull market; run that trade a thousand times and you lose, defiantly.

But when Special Super Secret Scott W. can tell the story of why the dollar is going lower and stocks and precious metals are going higher to a fifth grader...AND he's excited about it - that's the time to move to the middle of the ship.

You stand in the way of this guy. I choose surviving.

Follow @Centrifugal (still!) to fade trades in real time

Total Position: Currently 100% net-long, 46% invested

Currently Long (according to size): CRM (15.2%); APKT (13.8%); PPO (8%); DPS (5%); ACTG (4%)

Currently Short: no current position

Futures: no current position

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