Bruce Pile

Take Advantage of Weakness in Metals and Mining

You may be right about natural gas not being in short supply for awhile. About the only way that will happen is if America starts aggressively building LNG facilities to export gas and/or aggressively starts building nat gas refueling stations to convert our cars and trucks away from oil. Both those things would take time even if there was the money and backing to do it.

Why This Rally Is Unsustainable

Doug Kass is building some short positions in anticipation of what he sees as a 5-6% correction per the comment Jim Cramer made on his friday show. But this rally has already had a 5% selloff, at least in the Russell 2000 (April 20) and, like a train running over a possum, you didn't even notice. Why try to trade around it?

Making Sense of New Market Lows

The market has announced it's major direction from the limbo it's been in by breaking the broad index Russell and S&P support levels and moving the VIX out of its quiet consolidation to the upside. Knowing this market, however, this is probably some carefully crafted disinformation.

If you look at the VIX over the '00-'03 period, you see that a low was not put in until the VIX made a new high. This would suggest that we have to see our VIX travel all the way back up to about 80 from our present 50 while a large move down proceeds.

The quieting VIX and other indicators was presenting a viable threat of a sharp bear rally, but that looks less likely now.

You could be 30% in cash, 25% or more in short or double short positions, only around 10% or less in long positions, and have the rest in gold positions, and still not be bearish enough. This market seems bent on punishing prudence. That saying "Bulls make money, bears make money, pigs get slaughtered" is foreign to this market. The new rule is to be 100% double short, set it and forget it, and go fishin'.

The Economy, And Why It's Taking So Long to Fix It

If you accept the premise that the stock market knows all and will turn at least 6 months ahead of the economy, you should be discouraged by this week's action. There were some signs that the S&P broad market would hold the 750 support and head into a bear market rally. But such rallies almost always have a vigorous start up from a support level (see the triple bottom at the 800 level during the '02-'03 series of rallies). This week saw one big up day with no follow through whatsoever, but instead a wilt back down through the support level on very high volume - more volume than the bounce day. Not good. The other major indexes have already breached this support including the transports.

So it looks more likely the market will continue to drift lower. Let's hope it's a drift as opposed to a crash. Inverse investments will probably continue to be the only good area - short ETFs, gold, and now maybe even oil stocks. Both gold and oil typically move inversely to the broad stock market during bear markets. Gold was moving in synch with stocks last year but has since clearly broken free to go up as the market goes down. Oil stocks are still moving closely in synch with stocks, but oil itself may be breaking back into a climb having actually just now broken back above its 50 dma at least briefly. Oil stocks may now be where the gold stocks were back in early December, when you should have been loading the boat with them. But it's too early to make any heavy bets on the oil stocks unless you are bravely trying to nab some very near their absolute bottom.

Financials Bring Down the Market, Again; Hoping for an Obama Bounce

The financials ($SPF) provide an important clue as to whether the broad market is tanking to test the November low. They have been leading the market and they are already at their November low!