thechaser's  Instablog

After having spent maybe 8 hours on examining my point of view on market tops and bottoms, some additional observations.

The Power Elite has absolutely scuttled the Republicans and it is interesting they used the debate format to accomplish that.

Also, the Power Elite is on the verge of kicking the Greece problem down the road.  No Lehman style default.  Not now.

China is stopping the Shanghai freefall and using the New Year break to reverse course on monetary policy.  Forget tightening.  The opposite which will move my WYNN backup.  Good on that.

What do these things mean?

With zero financial holdings yield being the main message from the FOMC next week, this may in fact boost the stock market way above my currently held topping view of 1315-1325, which I have maintained for the last few months. 

The boost would start with short covering buying and then get carried higher with positive news.  In fact, the realization that Obama is a shoe-in lends stability and that too could entice the fund re-investment.  The question would then be, how would a potential runaway runup be managed?

Since I committed myself heavy to raising cash in the face of a perceived peaking and then falloff, would I then try and recommit and trade up?  How nervous would my holdings then be?  Could the VIX then quickly recede to below 20 and stay there?

I could sit on my small short positions with a sense the market will eventually collapse back below them but should probably cover my sold calls either through closing now or backing with shares on the naked ones.

Oddly, PM will rise.  How about commodities?

If SnP500 had a breakthrough, then the fires of manipulation set on Jan 3 and fanned over the last few weeks would then rage to maybe 1370-80 before some form of breather kicked in, however small.

This is extremely important to evaluate.  I still have 9 to 1 on longs and my shorts are easy to cover if I alter my view of topping now in favor of bandwagon runup.  This yankup has had more meltup to it, which makes me pause and re-consider my views of flat out pump and dump.

You know, a lackluster earnings season could easily be camoflauged by the Trading Elite with focus on say a good report out of a few like CAT etc.

Do not EVER discount the abilities of the Elite to affect and move markets.

In fact, it may be better to let them a runup more, then a kick in the head solely sufficient to like the 1200 base in mid December, maybe it tops up at 1345-50, doubletakes back to say 1295, then regains.  This would be very productive to managing the unemployment etc numbers and absolutely support my long held sense of 1450 SnP500 in July.

This could all be accomplished with no more overt monetary stimulus, just mo-mo bandwagon fund investing because nobody wants to be seen as the stick in the mud who missed a 2009 or 2010-1st half 2011 runup.  That is deadly for one's career because the world is mostly optimistic, not pessimistic.

So then a Marc Faber could be seen as, well, gee, told you things would go up.

Since a whole lot of stocks are way below their 52 week highs, the bandwagon runup could be easily stoked with TA.

The key will be Wednesday 1/25.  No move down by month's end and no Elite thumping of Europe drum, we then will probably move to increasing bandwagon runup.  Obviously, this all by no means eliminates the realities of the world, but standing in front of trains is no fun.  Better to get on board and ride them always ready to exit when newer levels of mickey mouse are attained.

I think I inherently felt this by refusing to sell any long positions with unrealized losses and also holding back some longs with gains waiting to see if market up continues (the AXP and PRU as an example).

That is what I failed to do last year when I got ticked off after the contrived PPT action on March 18 in the wake of the Japan disaster.  We went all the way to 1365 by the end of April, had a minor pullback, then shot up to end of July only to meet reality.

Do not let your selling longs for gains, whether short or long term, wrongly influence your trader's hat.  With a well defined sense of short term direction, it would be AOK to re-enter on a smaller scale and ride the escalator up with quick exits for mini pullbacks.

This would just make the 2013 calamity that much larger and profitable assuming you play this right.

I have plenty of cash to recommit to work with and do not get dogmatic.  Maintain your convictions and beliefs but work with the current market reality.

Absolutely do not repeat the mistakes of spring and fall 2009 and spring 2011.