Mad Hedge Fund Trader

The Entry Point Market Investors May Be Missing

dfh The scariest costume I saw on Halloween worn by a kid dressed as the Dow Jones Industrial Average. Listening to all of the gnashing of teeth and hand wringing after the Friday close about broken trend lines, accelerating downside volume, and crisscrossing moving averages, you would think that a time machine had just magically transported us back to the dark days of March, 2009. The volatility index (VIX) has popped from 20% to 30% in a week. Impressive. A new CNBC poll says that two thirds of investors are now expecting a “W” shaped recession, and that the next big move in the market is down. Once all of the performance chasers finally got the equity weightings they should have had last March, the market could only go down. We cut through support in the S&P 500 at 1050 like a hot knife through butter. Next stop: 980. Then hold your breath.

This Rally Is Nearing Resistance Levels

It's just another chance to sell. Any stocks dependent on the consumer feeling good about himself, like consumer discretionary and high end retail, you want to sell especially hard, because the consumer is about to feel a whole lot worse. If you don’t believe me, ask the shareholder of sharper Image and Linens and Things. There’s a Weed Whacker plowing through the green shoots. Keep in mind that there are not a small number of strategists out there who are expecting new lows for the S&P 500 below 666. Use the Meredith Whitney inspired short cover rally to sell into. Expect truck loads of towels to be thrown in when the big break finally occurs.

Why You Should Stick With the Dollar and the U.S.

This is a charitable few. The prospective US rating cut is also cutting the legs out from the US dollar, which is hitting fresh 2009 lows against everything. It turns out that if the world is not going to zero, you don’t need a safe haven like the dollar any more. And safe havens with a zero yield were not that great anyway. The New Zealand dollar has rocketed 30%, and the Euro has gapped through to a new yearly of $1.40. A lower dollar is one of the few certainties of life. The only question is how far, how fast. This further underlines my arguments to buy emerging markets and commodity producing countries.