Woot Woot! and Orphan Soot

When the widows and orphans are recommending getting short, you've got to have you guard on...and your shorts off!

You saw what I saw today, so I really don't need to recap. Shorts ignited account-fuses lately and blew soot into their own frenzied faces today. Citigroup was up 50%! ...to about $1.50/share. The market was up 380 Dow points! ...to about lunchtime levels of last Wednesday.

Even pigs fly on occasion if you wind them up enough.

Nothing I do requires any tremendous genius. I leave wave counts, price targets and sunflower seed models for other guys. But the ability to recognize pattern shifts and then adjust quickly makes a definite difference. Trade the style you are best at. My style is crazy-time.

As a matter of fact, I'm terrifically unsure just what the hell is my next step. That's true much of the time, but it is especially true tonight. Usually I bring a thesis to each day, but always what I am trying to do is react with the market at hand. That worked well today as I was on guard for a potential blow-UP. The longs in my portfolio and others on Sunday's eligible long-list were quite live and still look tonight like they should advance further. But having said all of that, I didn't like today's rally.

It was all bangers and mash to be sure. Glorious green cascading from virtually every industry screen. And based on the severity of the internals I was willing to bet my dog's left nut we were going to close on the day's highs (not to worry - he's already gelded. I pawned those off in a previous bad run).

But as much of a bullish case every vibrating TV-head this side of Jon Stewart is floating tonight, the fact is this rally was not so constructive as it was classically bearish in style (too-far-too-fast or basically all-at-once action). These are the moves consistent with an ongoing bear and consistently, they do not follow-through; not even the next day...even. Look at the past five or six of these 5%+ beauties - we traded lower the next day and lower-still further out. As I mentioned over the weekend, a slower, more back-and-fill upward bias is apt to indicate a bottoming pattern. This? Well, not so much.

But frankly I'll be surprised if we sell-off tomorrow. There remain too many frothy shorts in the pond and I think the gut-shot (all the way back to last Wednesday's price levels!) may not yet be enough to shake these bears. On top of that, one of the drivers of this bounce is the upcoming hearings on tweaking the mark-to-market accounting rules and that pony show is not until Thursday.

So contrary to my better judgement I'm not going to risk Tripod's nuts again until this M2M meeting is just about underway. The pattern so far remains as thus: The market rallies on an announcement of policy changes or strategy tweak and ultimately turns tail once details (or lack thereof) are defined. I'll push that bet until it pops; tomorrow is a wild-card, but sometime Thursday is perhaps the better (re)entry.

I will short an up-open tomorrow, since I can use the open-price levels for an easy benchmark and simply cover-up if the market is not retreating soon after. But in general I will try to keep relatively market-neutral until the House Financial Services subcommittee hearings begin to define the new-new rules and the market begins to show us the new-new hand.

For all I know we're at the dawn of a new day, stocks have bottomed and Britney Spears is going on sixteen. I'm not a fan of knowing. I prefer reacting.

And like it or not, I've already got a jump-start on shorting an up-open tomorrow. I fired fresh short-shots in the aftermarket during Cramer's latest mouthing. Bank of America was trading ~1.5% higher from the closing price before he muttered something about something about some technical something and I was happy then to short BAC up almost 7%; ave. 4.99 (I keep the Cramer volume very low or off and just look for his pet-stock symbols). Unfortunately he seemed to have struck a chord (not impossible, just ridiculously uncommon), as it is now trading 5.13, or 8.5% above the closing price. This is a quick trade (win or lose), based on the faith that his mouth amounts to more hype when it is open than it does by the next session. The fact that BAC kept right on higher, now more than an hour after the squelch, is concerning; my position size is 5.3% of accounts.

I was heavily long the Russell 2k and even those nasty Financials during the day today, but I let those uglies go before the close and I'm presently flat, following the new BAC short.

I don't have time to explain a great deal during the market, but I have been able to steam-stream my trades via the Tweedfeed >>> Tell a friend...don't do what this guy does.

This was too much of a brag post perhaps; sorry. I know you have but the future on your mind - as you should. But since I cannot spout any great shakes just now on what's the set-up for tomorrow, where the low-hanging dollops of market cream are lying, etc., I guess I just got carried away.

Is Britney really only seventeen?

Total Position: currently 1.03-to-1 net short, (54% invested)

Currently long (according to size): WNR, SNDA, PMCS, HMSY, ARST, IOC

Currently Short (according to size): AAPL, BWA, ALV, BAC, ELOS

Back Off! (I've got Bear Be-Gone)

While this potential rally is still dripping at the ears, last-half action today indicates selling may be exhausted for now. If Monday is live on the tape, I will attack long with both hands.

I won't be looking for significant upside, especially in terms of duration, but the first shot higher should be best for now; before we either back-and-fill for retests, or just blow to lower lows.

If the market gaps lower on Monday and blood flows yet again, then strike all of this. I'll be glad then that I've already lightened to more of a market neutral position.

The Streaming Twit today >>> was wild and woolly, but it's clear to me I've got my mojo back (ha!). My accounts finished the week up >3% in the end (Monday was the difference). By Monday coming up I won't even remember this week was a bit of a struggle.

I'm off now for the weekend, although you can be sure I'll update my live list of long-bongs from some remote island nunnery location. Beast out.

Total Position: I'm 54% invested overall. I'm technically 1.4-to-1 net short; however, more that half the short exposure is now in Golds and 15% of my long exposure is a 3X's Financial ETF, so you tell me (I'm calling it neutral-to-somewhat long. The golds will likely move lower Monday if the financials are rallying).

Currently long (according to size): WNR, SNDA, NFLX, FAS (Financials 3x's ETF), IOC

Currently Short (according to size): AEM, BWA, GDX, ALV, AUY

Toxic Tape (any price is possible)

No doubt, it's ugly out there. People are reeling, grim about the mouth. I know they don't need me to make light of all this, but why cherry-coat it instead? This has become the most orderly devastation of wealth since before any of us were in diapers. We have that in common now. East, West, elders, youngers; as people, as nations.

We're all wearing diapers now friend.

Today was another blistering day for the markets. The universal sucking-thumb sound was heard around the world. Selling was again broad and severe, but still there was no bona fide panic. There was no tremendous surge in volume. There was no extraordinary put-to-call ratios or other extremes in sentiment. There was no sign in the least that any of this has ended.

But there are signs we are close. Not close to a better and brighter financial future or anything stupid like that. But close to turning the worm, even if momentarily, in terms of trend. Nothing goes straight down forever.

That said, I'm not going to get into all the positive divergences right here and now and make any bullish arguments. The reason for that is I think there is a much bigger issue to deal with first. And that is because it is uncomfortably possible that we will see panic selling begin to emerge, right now; into something like a one-to-two day elevator drop.

I'm not saying this is likely, but frankly the table is set. There is nothing under us resembling technical support (if the Nasdaq were to gap to new lows, the next support for the major indices does not exist because there is none and BS pencil pushers on CNBC and elsewhere who have been extending straight-edges further and further - all the way back to Shakespeare's funeral, can stick support lines up their asses, because that is where they are talking from).

The market is a dynamic and when the dynamic shifts, it can happen slowly (quite common in up-trends), but if in a perfect storm it can happen all too quickly. For crashes to occur, there must be several factors at hand. One of these is absolute negative sentiment (and the investor psyche is painfully primed now for free-falling sentiment). Note that this is contrary to a more normal market, when extreme negative sentiment is a bullish indicator. When the market is crashing (1987 for example) there is a universal ABUNDANCE of negative sentiment, on that day especially. That is one of the key drivers intensifying the sell-off, virtually everyone is negative and jamming for the same exits at the same time. Short-sellers aside, for the moment at least no one is willing to take the other side and buy (don't forget to factor in margin calls, forced liquidations/distributions, hedge funds blowing-up, etc.).

Those short-selling bastards are the market's best friend in that situation and it will be one of the reasons why a crash, if it happens from this deeply oversold level, will be brief in duration though potentially quite steep; even the shoe-shine boys are talking shorts now.

If you think the market cannot crash because it is too oversold just now, then you need to study crashes - they occur when the market is extremely oversold. Oversold is never a bullish indicator (fill in the blank if you've read this column before) UNTIL the market is rallying.

Indeed, we may not crash (again, this is not a crash-call). The abundant number of shorts being one reason and subsequently I suspect we'll need a fresh negative catalyst here to push us into a panic. There may or may not be one in the cards just yet (something I don't want to bet against given the extreme distress in the environment right now and the domino-effect evolution these stresses have been breeding).

If we can get through another day without panic and the (yet unmentioned) positive divergences prevail, we will likely have started upward instead (at that point you can call it an oversold rally). It may advance quickly and violently (in which case it would smack of bear-market rally and it will not last) or it could develop more slowly, which is more bullish for the prospects of a longer, sustained rally. A slow, constructive start upward, with fits, starts and successful retests would begin to relieve certain pressures and create fresh buying (shorts cover, charts improve, value hunters come into the fray, money flows stop free-falling, money managers, corporations, individual investors and unified minors alike begin to come off of life support and breathe on their own.

A rally like that would manage a retracement anywhere from ~28 to 66%, depending, from the lowest-lows to the peak of hopeful-highs, and the timeframe would last some months.

If we can do all that without the blood and panic beforehand - I will be rather surprised.