Sunday, February 22, 2009

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.

1 comment:

Nate said...

So, what are you doing the last month?

Hedging is about all I did this week to lock in the rally gains of pat three days. ERX tore me up with 10 days down straight in Feb.