Taking off more long exposure, adding to shorts

Pretty clear bounce off resistance. Took off another 1/3rd of index longs near the close yesterday. Adding to index short exposure as the S&P bounces of 960. Not enough in the way of divergences for me to go fangs out here, just adding a bit of index shorts.

Taking something down here

Selling 1/3rd of the SSO right here. Put on with a basis of 24.75. Nice move, no need to be greedy.

Unbelievable the hate I got over this on some of the doomer boards. I got my buy points within 2 - 3% on a whole slug of individual stocks, caught absolutely nothing but crap over it. For the record, here's what we got. I wanted you in:

S&P at 890. Intraday low was 880, now at 951.

T at 23.75. It went to 23.19, now at 24.42
WMT at 48. Intraday low was 47.35, now at 48.82
RTH at 76. Intraday low was 74.24, now at 80.52.
AAWW at 21. Intraday low was 19.84, now at 23.47.


All I got for myself was the S&P. Cha-ching, doomer fuckheads. Things go up and down within the context of a bull or bear market. I happen to believe 5% is worth playing for.

Nothing anyone will ever be able to prove, but this whole market move over the last 4 months has felt like a massive pump job. I would hate to have been short it, which I suspect is exactly the point the PTB are trying to make.

Looking at the long side

Well, let's take a look at the general markets. The S&P and Dow charts, to me, are in conflict.

On the bull side, both show a Golden Cross right here, where the 50 and 200 SMAs crossed. Also, there was a good bounce off the high 890s area in the S&P and that 8250 area in the Dow, from an oversold condition.

On the bear side, it's still a broken trendline that measures to a top around 950 S&P, 8800 Dow. Also, index put/call ratio comes just below 100, starting to get a little more bearish despite the oversold. Quarter-end games tend to end early rather than late.

Still I'd say the next 5% is up. I took some SSO on that bounce off support. Also covered the PM short, need to get a little long here.

Strong groups this past week were transports (rails have been on fire – can’t find an entry point though), telecomm.

I am not enthusiastic, but I guess I could take:

- T as close to 23.75 as you can get
- WMT looks good to enter as close to 48 as you can get.
- If you want an ETF, RTH as close to 76 as you can get.

One real flier among the transports. I probably won't do this:

- AAWW, as close to 21 as you can get him.

Some physical silver around 13.50, if he comes back.

Covering a little something

Both silver and gold continuous contracts at the 50DMA right here, about a 50% retrace of the last move, at support.

Let's declare victory and cover a third of each of them. Tried, but failed to get long some silver at the 13.50 level on the physical metal.

S&P did a credible bounce off support in the 890s. Taking 800 SSO at 24.75 on the long side.

Bucky taking a buckwheat up the green chute as well, Euroland making tightening noises. Why am I continuously thinking '1931' ?

Trendline breaks

All three indices seeing multimonth trendline breaks today.

Looking like a trendline break in the VIX as well.

I think you want to hold off until later in the afternoon to see what the invisible hand of JPM will do for a stick-save.

Good entry on the short side right here.

I already lost my energy and PM longs to trendline breaks over the last several days, leaving me with shorts on the S&P, gold and a REIT.

I'm trying to add on the short side with about 7% of the account, being stubborn waiting for my price. I think you'll get another chance over the next several days as it tries to flirt with the trendline.

Got short some silver via ZSL, but that was it.

Charts I'm watching

Mostly on the long side...

Purely anecdotal on my part, $USD is a crowded short. I would look for a bounce, with concomitant commodity weakness. I don't know that I'd extend that to say "and treasury strength" since the two have been decoupling for a few days.

However, a stronger dollar would tend to mitigate against the export/heavy industries on this list:

Insurers: HIG, making a pennant, stochastic just crossed, MACD turned up from down low.

Aerospace: BA, like to see him fill that gap at 50, since he's overbought here. Not buyable right now, just a watcher.

Midstream pipelines: APL, inside day after a breakout. Overbought here but, in my ideal world, he'd make a pennant right here.

Tires: CTB on a breakout above 12.

Industrial metals: AA

Personal care products: ACV.


On the short side, taking a shot at a little gold short, playing for 4 - 5%.

Update: Got no longs at all, got some gold short via DGP.

Lots of trailing stops hit

Lost all the golds, all the energies and part of the treasury short to stops today. Every one of them was very profitable. Too many positions to detail right now. I could see the confirmations streaming in starting in over the mojo wire around mid-morning. End of the week, I'll detail what's *left*.

Bigtime in cash, with maybe 25% of the account committed, mostly on the short side now.

For as many weeks as I can recall, though, exercising good trading discipline has been an exercise in futility, as the market seems to have no memory from one day to the next.

Rate issues come to the fore

I took a look at the TLT chart, where it looked like 90 was powerful 2-year support. I wasn't willing to stand in front of a steamroller to pick up a few nickels, so I covered 1/3rd of the bond short on Wednesday afternoon late.

Debt issues back on the table

I came into the week net short, which, of course, was painful on Monday. I think we hit an inflection point with the crushing Cali referendums, then the Japan sovreign downgrade and Britain being place on negative watch. Of course, the killer was that the language in all those S&P analyses applied directly to the US's situation. It's hard to see a scenario that's bullish for treasuries in all this.

The ultimate outcome in California's situation might be a reverse-Okie phenomenon. Given the shabby treatment bondholders have received lately, it wouldn't shock me to see muni debtholders get crammed down. So, of course, Cali muni debt is up over 1% today.

I was up to 60% cash from the trailing stops that were all hit last week. I put some of that back to work in some golds. I picked up the second half of a position in BVN at 24.50. So now I have on 800 BVN with a basis of 24.73.

I picked up another microcap I'd traded in the past - AGT. It did a bull wedge back to support at 0.40. I put in a bid at 0.39 and got hit for 12K shares. That .50 level is really important, going back a couple of years.

Longer-term, I do like the way MEE is forming up here again - pennant with a base at 18. Many coals and coal-related stocks have a similar pattern - CNX, BTU, ANR - but MEE is the most prominent. But at the same time, natural gas can't get out of its own way and it's diverging wildly with oil. So, at best, we're getting some mixed signals in the energy space.

Pretty good week

Lost a lot of things to trailing stops.

MEE, out at 22.10.

BHI, the last half of that's gone now at 38.25.

SU, the last half of that's gone at 31.40.

HL was setting up some negative divergences and got turned away at its 200DMA, so that tiny speculative position is now gone.

Where I sit right now is long some PMs (DGP, BVN, GBG), short real estate (SRS) and treasuries (TBT), short indices (SDS). 57% short, 43% long, but around 60% cash after everything I sold last week. I'm in the hole on the index short, but up 6.1% for the year right now.

Major indices are getting into slightly oversold territory. S&P should find some good support 850-ish. Nasdaq getting pretty oversold, but still overextended. The rule has been that the upside and downside have both gone on further than I've expected, every time. Still, some weakness on Monday would be a good place to start unwinding shorts.

I don't know if you'll see it, though. LOW earnings Monday are probably going to be interpreted as more green shoots to smoke.

In a quick chart review, the the defensives played well this week, but the only real long-side setup I see is MO's nice ascending triangle with a base around 17.45.

On the short side, one that I missed last week... utes getting killed here. I don't know if it's the same bond rollover issues that got them last year, or some political nonsense about cap & trade. SDP did a nice double-bottom at 40.

Lots of retail looking tasty on the short side. Of the trendline breaks, I guess I like JWN best on the short side. AN and CHS are also like this.

Trendline breaks

Looking at the markets simplistically, every index has broken a multimonth trendline. Naz, you could really have gone short it on Monday. It fiddled with the trendline resistance for a couple of days; now it's decisively broken.

A caution, though... In thinking about this last night, I re-read Magee's chapter on channel lines and discovered an interesting observation. The amount (of points) by which the chart fails to reach the top of the channel by (in Nasdaq's case it's about 40 points) is usually the amount by which it falls from the lower trendline before having its first snap-back rally.

In the present case, we broke the channel at 1700 and closed last night at 1664 so at 1660 we'd be pretty close to that 40 point target.

Expiry week, so be careful of the snapback. I'd still be a seller of the snapback rally.

I lost all my remaining (small) energy positions to trailing stops the last two days.

Still have on the gold... played in the microcaps GBG, NXG. Lost NXG to a stop yesterday. GBG still hanging in there. The ETF DGP is still hanging in there.

I got a half-position of 400 BVN on at 24.96 the other day. Still have him with a stop at 24. Some foreign golds (South Africa) are the best charts I see on the long side - not saying much.

What I'm watching - a couple of bad days from now, could get a primo entry short TLT around that 100 resistance.

This jibes with my intermediate-term theory about municipal debt guarantees. Short story, Cali (and a number of other states) are about to have a funding crisis. I suspect the FDIC will wind up guaranteeing its debt, as it did for banks and financials. If one state's debt is guaranteed, then all states must be, else there will be capital flight. So you might as well go long the junkiest muni debt from Inland Empire GO bonds or Detroit Sewer bonds over short the long end of treasuries and reap the coupon. This could be a double-digit trade for years.

Weak CRE stocks

Noting the weakness in a number of the REITs after their big (possibly artificial) runup over the last 6 weeks.

One that jumps out is the trendline violation on big volume in CLI. Other REITs - SPG, AKR, HOT, BXP - confirm the same pattern.

I put on a position in SRS starting from the 22.50 range last week. This thing trades like nuclear waste, so stops are in at 24.

On the long side, the coal group generally looks strong. Still like MEE best in this group, have some on, put some more on Friday to bring me up to 2K shares with a basis around 11.45.

Also on the long side, I want to put a bid in on gold around 850, playing for something in the mid-900s.

Yay for stops!

Got nearly all the juice out of that SKF trade before it tanked.

The Geithner speech really juiced things.

Today, looking like the financials will give something back on the horrible COF numbers. YHOO inline, Bartz doing a good spin-job.

Oscillators *way, way* overbought here. S&P oscillator at +9, I would be a seller at +5. No new longs here, peel 'em off if you have 'em.

Looking at SRS just below the all-time low, around 25.50. Again, these instruments are to be held no longer than green bananas.

But the market has a distinct squeeze-y feel. Keep those stops tighter than a fist and positions small.

Wedgie in the indices

I took off half the SKF yesterday and moved stops. Because (repeat after me) We Never, Ever Let a 25% Weekend Move Get Away. Plus, the double-short products are just a pure shit ripoff. They're intraday-only.

All three indices look to me to be at the bottom trendline of a wedge. A break of that downtrend line could mean a lot of downside for the markets. A bounce could be a big move up.

I went back to the bible, Edwards & Magee's "Technical Analysis of Stock Trends," and looked up the pattern of a wedge.

Tell me how well their comments have held up:

Rising wedges are common in bear market rallies. Magee says that it is so typical that frequent appearances of wedges after an extensive decline bring about questions as to whether a new bull trend is in place. Does that sound familiar?

Another item of note is that it normally takes more than three weeks to complete. We've got that. And once prices break out of the wedge to the downside they usually waste little time before declining in earnest.

We're still somewhat overbought, not as bad as it was a week ago.

I would lean to the short side here, with the caveat that it's hard to make money during earnings season either way.

Geithner speaks, or rather obfuscates, late morning. Last time, it was worth a 100 point Dow bounce. The plan is to stay neutral until he speaks. If you want to be long, some oil might be good on a reversal.

Fading the rally

Rally looks artificial and long in the tooth by every measure I look at.

Got hit at 56.75 on 400 SKF for a green banana trade. Want to stress, there's no technical reason within the framework of my methods to do this here.

Turned loose half the SU at 25.75, basis was around 18 off that double-bottom. That was a pretty clearly an intraday triple top at 25.90. You really want to be shedding longs here.

Also, half the BHI, again, bought off that double-bottom weeks ago. This has been a very disappointing position.

It's basically been the overlevered junk leading this rally off the bottom.

Actually, I am thinking this will be a buyable pullback. You see this kind of move frequently on the Monday after expiry.

Builders look good on a pullback... XHB at that 12 support, I think, is where you want to enter. I like the composite ETF chart better than any of the individual charts.

As a rough guide, I'm thinking in terms of a 50% retracement of the whole move since early March. This would be, very roughly, S&P 750/Dow 7250. Some reasonable support there as well.

I think very precise technical levels are nonsense to try to trade by. Stocks in the real world come up a little short, or go over just enough to rape you. I think in terms of scaling in, in 2, 3, 4 trades, then put a stop on the whole basis.

Couple of moves in the last few weeks

OK, a quick update... the strategy here is short the S&P, long oil, short treasuries on the long end.

Got some oil... full position each in SU and BHI. The former has done fine, the latter is sitting still.

I'd sold gold on that spike above 1000. Bought it back last week as it came down to the bottom of the channel. You could argue it's making a bull flag here. I'd be a buyer close to 850, playing for 10% or so.

Pull out the chart on XLU to any duration you like. Last year, I caught that H&S on the short side, covered it late last year. Now, it's back at resistance, having barely participated in this rally. Bigger resistance at 30.

Nobody's going to bail out ute debt.

Chart work for the weekend

Oil stuff I've been buying over the last few weeks has played pretty well. I'm thinking we're in a mode where you want to buy weakness in these and trade around a core.

General market and most stocks I see are very overbought. Wouldn’t commit much money in on the long side here. But there's the potential for new Treasury scam this week, so I think it's important to have some long exposure, even if it's token.

Metals and materials charts look good to me right here, but stochastics are uniformly in the overbought range. Some charts I like on a pullback, and the (loose) entry points I'm looking at:

HL, around 1.90.

AWC around 2.75. The whole aluminum group looks pretty good.

TCK, around 4.50.

For a consumer staple, CL around 55. From some work I did a couple of years ago, this stock has the best inverse correlation to the $USD of any S&P component.

On the short side, the whole insurance group has come back to resistance. TWGP on the short side.

Once you get away from the major indices, I think the double ETFs are a total scam and a thorough bitch to trade. That said, take a look at EEV a little closer to that 43-and-change low.

Canada

Suddenly liking everything Canadian I see.

ECA, CNQ, SU, MUR.

The Canada ETF itself, EWC.

Oil should've fallen off a cliff after the OPEC no-call this weekend.

Watching some OIX components

Some of the oil services index look pretty good here from a risk/reward.

Liking BHI, 9 days down at support.

DO maybe has the best divergences.

RIG looks OK here too.

Didn't get hit on any of these.

The rest of the DGP is gone to a stop. Gold is increasingly looking like a big double-top, with the trendline down around the 850 level.

Noting that there's been call-buying in the VIX, all the way up to the 90 strike. This should push treasury yields back down.

So, right now, for the longer term, I'm kicking around the idea of a paired trade... long munis over short treasuries, reap the coupon. Later in the year as tax revenues fall off a cliff, the states will encounter funding problems and their debt will blow up. It will wind up being backed by FDIC/treasury.

It will be immaterial which debt quality you own. If you fail to back one, there will be capital flight. So you may as well own the worst of it, stuff from the sand states. I'm thinking something like long PCQ over short TLT. You don't want to use TBT for long-term trade because the Greeks get involved in the double-shorts. If these two classes of debt return to historical parity, you'll be looking at a 60 - 70% gain.

A good day to sell some gold

or at least move up the stops. No excuse for letting a 50% move get away.

Doing some selling into this morning's spike. Got hit on half my remaining DGP position. Pulled up stops on the rest so a good move doesn't get away.

Got blown out of the tentative little long-side trade I made Wednesday - lost the other 250 DDM right away. Terrible call on my part. Well, you have to take a shot at something that looks like it could be a double bottom.

C, BAC trading today as though they're in FDIC hands on Monday. I can't decide if something's leaked, if their "stress test" (what total bullshit!) isn't going well (GS being up supports this thesis) or if it's just Geithner's disappearing act.

Tough call for policymakers. Keep feeding the zombies, it'll be a black hole for otherwise useful capital for a decade. Let them die, it's like 10 Lehmans, an ELE (extinction-level event).

I think you have no choice but to let it go, try to think in terms of shaping the society for the post-mortem of Western finance.

Scalped some lunch money

I did just what I said yesterday, took 500 DDM around mid-morning, scalped half of them when I saw it wasn't going to make 24.

Bid way down low on some gold and missed. It had a nice reversal yesterday.

So I come in slightly long today. It's hard to think of my portfolio as being either "long" or "short".

SLW reports today. Could be an opportunity if it has a miss. But the run in the PMs is looking a little long in the tooth to me - straight up from 750 to 950 is a helluva move, and you want to take some chips off, if only as a matter of good money management.

A piece of anecdotal evidence for the long side:

AAII today showed 21.64% bulls and 56.72% bears. The last time bullish percentage was this low was about a week before the July lows; prior to that, about a week before the March lows. The last time bearish percentage was here was - shocker - at the November low.

Jobless claims probably won't move the needle today.

Position here is cautiously long. In Toddo's nomenclature, 1 leg in the hoofy suit.

Gut-check time

So, we come into the day after a close 0.11 points higher than the November 20th low in the Dow.

Gut-check time. If it bounces here, is it a double-bottom?

Start with the bad news…

- We’re nowhere nearly oversold yet. It’s not even close to the levels of oversold in January. Maybe 20% of the way as oversold as last November.

- At a very macro level, the transports made a new low. If the Dow also makes a new closing low, that’s a Dow Theory sell signal.

- Ratio of Bank index to S&P has rolled over and died.

- Moving average of volume has been climbing into the decline.

The good news…

- Looking at the Dow between yesterday and November 20th, I see positive divergences in 3 of the 5 indicators (oscillators and trend indicators) I look at. Usually, I don't trade a pattern like this without at least 4 positive divergences.

- The index put/call ratio is above 1 for the first time this year. Today, it sits at 177%, which should be pretty bullish. But the moving average of the put/call ratio is still in its lowest 10% of the last 5 years.

To me, the biggie is:

- From the 13-D filings this morning, Uncle Warren pukes, blowing out franchise positions in UBS, JNJ, COP, PG at multiyear, sometimes multidecade, lows.

TGBBGDDD!

I try hard never to editorialize here, but this pisses me off: taking out full-page ads in major newspapers exhorting us to "Buy America" while at the same time selling his US stock holdings makes Uncle Warren a pump-and-dump scumbag. Instead of a convincing writing style and cross-posting around the internet, he used his bully pulpit and the major newspapers to accomplish the same thing. He really deserves to lose his ass for pretending to wrap himself in the flag when he was really talking his book.

So, gun to head, I’d say: tradeable Dow rally here. It probably takes out the lows mid-morning, just enough to freak everyone out. That retest has to be terrifying. I’d put some stops a little below where it trades to around 10:30-ish this morning. It should be a fairly precise thing.

I plan on putting on a little more than I really want, maybe 500 DDM, with a notion of scalping 200 intraday.

Everything worked today

Really thought the indices were going to blow up today. Dow fell out of that triangle, it looked like a stop at that 7450 intraday support, then into the abyss to 4200.

Nice stick-save by Congress. Of course, the bill is crap, just like everything before it. It just shows you that the sentiment is so bad, even a non-bad news item can move the needle.

There's a t-shirt slogan I love - "Don't believe everything you think." I understand exactly what it means. Over the years, I've learned to read my own mindset as a guide. Whenever things feel blow-uppy is a good time to cover some shorts. Whenever I feel all smug and arrogant about a good position, means it's time to take some of it off, or at least throw a virgin into the volcano.

You can always reload on a position. Mr. Fidelity won't send the Excessive Trading Police after you, and I certainly don't begrudge him the $8. But what you can't always do is get back a profit once it's gone to Money Heaven.

So I did some selling on my own terms. I never know if this is good timing or not, this is just my small means of exercising a measure of control. I aim never to be greedy and to have the humility to accept free money when it's being handed out. Thank you, great nation of America, for the opportunity to pay taxes.

Put out half of the GBG for bid at 1.70, got hit. Put out half the NXG at 1.37, got hit. Again, these gold microcaps are just tiny little trades, maybe a quarter of a normal position, and I'll never let them get bigger, but the important thing is to trade them well. Free double-digit percentages in a week is a good thing. It's time to move up the stop on the rest.

Put out half the SRS at 70, got hit. Moving the stop there, as well.

I figure, keep on hammering out 10%, 20% trades, it's hard to help making some money.

I predict I'll be unemployed in 6 months. Trading as though my life depended on it is about to become a very real exercise.

Watching the fireworks display yesterday

Just a quick note this morning.

Got stopped on another 100 TBT. Tightened my stops some more on another chunk. Reading from Miller-Tabak that the big note auction was well-received yesterday. Geithner didn't inspire a lot of confidence either. Yields on most of the notes are in a triangle here.

I keep trying to pay my price on some gold. Got hit on some NXG, put in an outrageous bid at 1.24 and got hit on another 1500. Also got hit on another round of GBG at 1.41. Gold looks strong into the open here, so maybe flipping some of that.

Triangle in the Dow looking ominous and it's the most bullish index. It measures to 4200 by my read. Got a bid out on some DXD into what looks like some opening strength.

So, position is basically long gold over short commercial real estate, long bonds and the Dow. Bonds are probably going to kill me today, gold looks like it's going to work.

Fulcrum

S&P 875 is resistance here. Breakout, and it could measure to 940, breakdown and we could be back in the low 800s.

We're well into overbought range and the put/call is about 0.67, lowest since January, 2007. Not enough bears, not enough by half. That would be my bearish argument.

The only bull argument I could muster would be "Look, chart!" on a breakout, plus a desire to want to lean against everyone who wants to sell the Geithner announcement.

Dollar/yen bouncing off an uptrend line that's run since September. Could interpret it as a double-top, too, when it hits that 105 level. S&P has been tradeable by the dollar/yen for a long time. Someone, somewhere, really really wants the carry trade going again.

Reading back over these thoughts, I see a good argument for getting flat and delta-neutral.

Yesterday's action - got hit on another 2000 GBG yesterday at 1.45 near the open when he traded down.

Didn't get hit on anything

I missed on everything I bid on last week. Still liking some transports.

China hit a trailing stop, sold the last 150 of the FXP last week around 44. China is running hard, as is the Baltic Dry index, a lot of the materials companies.

Half the SRS went at 64 in that big-spiky day on Thursday. Bottom fell out of that, I'm down on the other 200 now.

My inclination, and I guess everyone else's, is that TARP 2.0 on Monday at noon will be a sell-the-news event. Maybe worth it to add some long exposure just to be contrary.

My look at the S&P, we're either:

a) At the top of a trading range
b) At resistance that measures to the 940s on a breakout.

We're a little bit overbought, not too badly, though. That's multiple defenses of the Dow 7900/S&P 800 level, with divergences. I would be inclined to add long exposure here.

Haven't had time to look at too many charts this weekend. Went over the golds pretty carefully for something buyable. Many of them look like something you'd hold if you already owned, but I was looking for ripe charts.

One microcap that I've traded successfully a few times in the past looks pretty ripe here: GBG. If it breaks above that triple-top at 1.50-ish, it could have a full buck to run.

Barrick (ABX) has important resistance at 40.

Triangles, triangles everywhere

And not a thing to buy.

Just to be contrarian, I have to ask where there are *any* good long-side trades out there? Emphasis on "trade." Everything is a batch of green bananas in this market.

Here's my best idea: UGA, the gasoline ETF. Breakout above that neckline at 23-ish measures to 30. Want to see him a little lower, but that looks like a 1-down/6-up situation.

Physical gold chart looks OK. Give it a chance to pull back to that neckline. I don't care much for any individual miner chart, though. GDX looks kinda toppy, not confirming gold's move. It could pull back 10% easily before any support.

I always start with the indices/ETFs and work down.

Almost all the broad indices and larger industry sectors look like triangles to me. S&P is a good example, lower highs and lower lows. If it breaks down, it targets to around 250, and we're not even remotely oversold here.

On the long side, Dow Transports look like a promising double-bottom around the 2920 level. RSI and Money Flow divergence but nothing else confirms. None of its individual component charts confirm the pattern either.

A couple of its components are truckers. If we look among those, we find maybe 2 out of 10 that look like this. Watching CNW, maybe HTLD around 13. Not very excited about these, though.

Dow Utes, until Wednesday, were the only group up for the year. I see a triangle with higher lows since October. Breakdown would give you a target of about 230. Breakout above that multitop, 390-ish, would be very bullish. Call this level 30.50 on the XLU. UPW about 37.50. SDP the other way.

XLP around 21.40 could be a good entry point. I don't like any of his components except, maybe PEP at 50. Setting up a trend indicator, oscillator and RSI divergence at that level.

Not seeing much on the long side

Seeing Dow, S&P, Naz just above midline overbought. No compelling reason I can see to be long the indices this particular day. On a very short-term chart, S&P failed resistance at 875. You could make the case for being a bit short based on that, but I'm not playing indices today.

The thing that caught my eye this morning is gold. I see him quoted 921 as I write this. About 916 would be the right neckline of that squint-y H&S pattern. This would target to 1200.

The amazing thing is, this is happening in the context of a rising dollar. I think the dollar strength is an artifact of euro/GBP weakness and gold is acting as a reserve currency . CEO of Barrick talked about the possibility that China would divest its dollar holdings and convert to physical gold. Rumors of a bank holiday in Britain. Rumblings about problems with physical delivery from Comex - the usual stuff that outsiders like me can never really pin down.

Scanning the groups, not seeing anything to excite me on the long side.

Where I sit right now: Over half cash, biggest position is still TBT, DGP, SRS, a little FXP left. DDM on the long side as a balance. Hard to characterize in terms of long/short exposure... perhaps a better way to put it is "long nominal rates and panic."

The last week or so has sure had a melt-downy feel to it, like something big could blow up any second and the world would change forever. This has been disconcerting to watch for a couple of years now.

Did a little selling

Sold the DIG into the strong open yesterday. In 24.99, out 29.20.

Took down another 100 of the TBT at 45.51.

Updated after the close:

Near the open, another 100 of the TBT got taken out by a stop. In at 36, out 44.75. That leaves me with 500 on. Talk that Bernanke would buy the long end to effect QE. I guess the good thing about it is it means he still has a shred of credibility left.

NXG hit a trailing stop, 1.17, looks like a reversal. 5000, in at 0.65, out at 1.17. I'd pyramided some at 1.06 like I talked about last week, took it out at 1.23 on that big up day. Not a lot of money, but a good trade.

Gold's worth watching here. Above 916, you can squint and make it a reverse H&S out of it that targets to 1200. But a lot of the charts I'm looking at seem to have reversals after their big week last week. I could see it going to the low 800s from here.

Gold pops his trendline

Of all the stock groups, that seems to be big story of the day. It obliterated the downtrend line that'd been giving it trouble for weeks.

I sell the rips. I'd let my gold positions get up to almost 15% of the account. Nothing, never ever, for any reason, goes above 20% of the account. I sold down 150 of the 1000 DGP.

In my ideal little chartist's world, we'd see a low-volume pullback to that trendline, where I'd put on some more. But, a 20% move has to be taken in this market.

Got hit on 400 DIG, bid 24.99 for it just to be difficult. Pisses me off that I could've paid 24.50 a couple of days before for all I wanted. That wouldn't have gotten hit. He ran all day, got stronger and stronger. If there's a strong open for oil on Monday, I may have to take that position down... can't turn away 10%, especially with these worthless double long/double short instruments.

Took off another hundred of the TBT. 36 handle to 45 handle. Suze Orman's recommendation has me freaked. Plus, you know, WE'RE IN A FUCKING DEPRESSION where, you know, LONG BONDS ARE HISTORICALLY THE SINGLE BEST ASSET CLASS. I'd just feel a lot better taking a little something off the table.

I was really regretting not hitting the SRS bid above 70 last week, so when we had a weak open, I let 200 of my 400 go near the open at 67 and change. Of course, it fell the rest of the day. You have to take every little win you can get.

The only thing I'm really down on here is the DDM I've been using as a partial hedge. Have to decide what to do with that... hate to take a 20% loss, hate even worse to let him turn into a 40% loss.

Now, in reading over this post, it sounds like I'm playing like a cornered animal. Which, when I think about it, is really the case. The job is getting very iffy at this point. If it goes away, this is how I'll have to make my living.

Wrong, but in the right way

Totally wrong call on my part off the oversold reading. Everything's lower since then.

This week, I felt like the bad news out of Britain (nationalization rumblings) drove the news flow.

Positions are playing OK here.

TBT, put some more on with a 39 handle, took it back off yesterday for 5 sticks, primarily because Suze Frickin' Orman recommended it on her show.

Gold is hanging in there. This morning, futures look like it's going to pop above trendline.

Added some SRS, so I'm up to 400 now with a basis of 59. Wishing I'd hit that bid above 70 so hard it rattled teeth.

Couple of the microcap golds are playing well. NXG popped a multi-top and held it. Time to pyramid a little bit there.

Literally tons of oil charts - NE, DO, BP -look like they're basing. I tried for some DIG at 24.50, but just missed it. Look like they'll be coming back today as well, so being patient with them.

What I did last week

This is a market where I think you have to be happy with 5% in a position and you have to be willing to take profits instantly.

I got two big things right - the overbought condition and gold's trendline resistance.

On the first thesis, I took an additional 300 DXD with a 54 handle. I took it down into the gap Wednesday at 61 and change.

I had on 300 FXP on with a basis of 32.47. I sold 200 into the gap on Wednesday at 45.25.

So that left me imbalanced a little on the long side. I took 200 SRS at 59.50. Whenever I put out a lowball limit order that gets hit, it always makes me doubt that I really want the position. We'll see... expecting a bunch of retail BKs to lean on CRE. CRE isn't really TARP-able... bankruptcy there isn't systemic, it just transfers ownership to the bondholders.

AGT is playing really well. Just playing for pocket change, took another 20K at .18, flipped him at .24. It doesn't matter how big the trade is, the important thing is to trade it properly and have a winner. He's making a nice little pennant here between .18 and .24.

So, right now, I have 20K of AGT on with a basis of .18. 5000 NXG with a basis of .65, he looks like he's having trouble at that important 1.00 resistance. Chart looks very wedge-y to me. Give him one more chance to crack it from this oversold market, then turn him loose.

Gold generally doesn't excite me. The bear case is, you still have the same issue with that downtrend line around 850. Bull case, well, that's a stretch... if it recovered to 900, you could squint and make that a raggedy H&S with a target of 1100.

Not thrilled by the charts in any of the stronger groups. The one I'm smacking myself over is missing the move in MO off that 15 level, especially when it's sitting right there on my screens.

One thing I am noticing, even though the charts are raggedy, water stocks seem to show outperformance every time we come off a low. But, the big ETF PHO looks like shit because it's so weighted in GE.

MeanGene did a good piece of work on the long-term picture for silver, which everyone should read: http://upstarttrader.blogspot.com/2009/01/silver.html

All 3 indices back to oversold and turning up with oscillator buy signals in that reversal on Thursday... man, that happened quickly.

The S&P held and finished right at the pivot at 850. Therefore, my inclination here is to lean a little long. I'm 55% cash, 25% long, 20% short.

Did some selling

Stop on SLW got hit at 6.25. In at 2.73, out at 6.25.

Bought part of the position back, 5.68. 2000. Out again on Friday at 6.15. This position is all done.

Held the SU, feeling like a fool, but got 24.01 for him. In at 18, out at 24.01. This position is all done.

Sold all 2000 of the GBG, the weakest of the golds. Just pocket change here, in at .91, out at 1.14.
Still way overbought, but encouraging how the S&P held that 896 level.

Going back to the overbought/oversold game to see if it works. Adding some index shorts, using DXD as a proxy.

Overbought - careful here

General markets getting pretty overbought here. McClellan summation index, Moving average of A/D line, Williams oscillator as overbought as they’ve been in many weeks.

Very curious to see if the overbought/oversold game starts to work again.

No new buys into conditions like this, even though there are a lot of oil and gas stocks, basic materials, some tech, that looks pretty good.

Commodities generally acting oddly divergent. Oil starts the day strong, finishes weak, feels like a reversal.

In a mode where I want to take some profits, if for no other reason than to throw a virgin into the volcano. I don't have it on in this account, but probably start with some of the SU I have over in the long-term account, put on at 18 in December.

PMs started weak, finished fine. Almost lost SLW to a stop, actually felt kinda stupid hanging in there with it. Gold having trouble with its downtrend line (and its 200) since last June. Probably sell the weakest gold - GBG.

Be aware that I am frequently wrong, and often early even when I'm not. As a matter of general principle, perhaps just because it brings a sense of order and control to my universe to sell at a price of my own choosing.