SeeTheLight

Friday Outlook: Commodities, Global Markets

The absence of stick saves and dip buying is very noticeable. The jobs report was worst than expected. I'm thinking we could see another solid triple digit down day on the DOW again. Back to back triple digit down days are something that hasn't happened since this rally began.

Personally while I am already mostly in cash, I think its time to close up most of the long positions and get real cautious. If next week continues to bleed red it would probably be safe to say that recent high was the bear rally top and we may see a sizable correction which of course means it will be time to start looking for good short positions.

Good Luck all.

Thursday Outlook: Commodities, Global Markets

Trust me, I'm painfully aware that the fundamentals are not there. They are simply awful, but they always are in a bubble (I mean did you think buying a house back in early 2007 was a good idea fundamentally?) This most definitely has all the appearances of a bubble. I truly believe that the crash after this bubble will be even worse than the one we just experienced but at the same time I think it is silly to not take advantage of the bubble. I am being very cautious, putting in stops that I am comfortable with and only investing a portion of my portfolio.

Until the government stops or at least slows quantitative easing, we are staring another bubble in the face and if you want to wait it and the subsequent crash on the sidelines, that's fine, part of me applauds you but the trader side of me sees an opportunity here and I can not ignore that.

Good Luck all


On Sep 17 01:10 PM fjd10595 wrote:

> IT is the wrong time to deploy money, the fundamentals are not there
> and if that is not enough, we zoomed 50% in a few months. This,
> after the greatest financial stress since the depression? If you
> think it has reversed in one year, you are wrong.

Thursday Outlook: Commodities, Global Markets

Against my true feelings, I put some weight back into equities not because I believe in this market but I fear it. I read a comment somewhere we are in a barbell market, where on one side we have many people playing the deflation trade and on the other many are playing the hyperinflation (but really stagflation) trade.
It certainly does feel like we are walking a high wire here with a barbell as our balancing pole and no net below.

Anyways, the recommendation was you weigh your portfolio equally for each outcome so thus I have still a lot of cash (for deflation) but have put the rest into assets that will win in a stagflation environment - precious metals, commodities, equities tied to those markets as well as beaten down equities.

Yesterday I timed it well making my moves at 10 o'clock dip, dropping my UUP hedge (betting against this market is foolhardy so I removed my hedge) and buying back some older positions that remarkably had dropped in the past 3 weeks. Obviously trailing stops are critical.

As I mentioned above I fear this market more than I believe it in, but I fear a parabolic ramp here. I suspect this market will go parabolic before it crashes and I feel I have to position myself to take advantage of that possibility using a portion of my portfolio.

Dave you nailed it, we are in Hotel California, where do I sign up for an ARM to buy a McMansion before they take away my leg? All hail Bernanke and his broken dreams of stagflation for everyone.

Good Luck all.

Wednesday Outlook: Commodities, Global Markets

It is very easy to want to take profits in a market like this, as an underlying awe in the disconnect with fundamentals lingers in the back of everyone's mind.

Personally, I took profits in late August fearing a September crash that has yet to materialize and have been largely on the sidelines since then (except gold / silver and a small position in UUP as a hedge).

The hypothesis that September would result in increased trading failed to materialize (so far) and leaves me with the question - What now?

Sadly, against my true feelings, I feel one must be positioned neutrally in this market, so I will gingerly start picking up my long positions again, and will probably drop my UUP hedge.

Fundamentally, I remain convinced that this is just a bear market rally and sooner or later we will return to the mean, but in the near near term I see little catalyst to prevent the HFTs and trading desks flush with near free government cash from continuing to bid the market up. Clearly this has nothing to do with fundamentals which remain awful but banks are not lending but rather are "investing". A rising tide (of liquidity) lifts all boats and one must respect that (even if one knows the tide will eventually go out again).

Further to this effect, the fact that the Fed did not even mention the dollar (save for some passing remark from SF Fed Jen Yellen) tips their hand. It leads me to believe that they will do everything in their power to prevent deflation and will meekly accept stagflation instead. I do not have any confidence that they will succeed long term, but short term to bet against them while they are still trying is pure folly, so I will return to a more neutral stance and pick up some longs that I feel have a relatively good risk/reward.

Good Luck all.

Wednesday Outlook: Commodities, Global Markets

Seems like Turbo Timmy and Helicopter Ben are ok with the US Dollar being the sacrificial lamb. I just wonder how long all the US creditors will keep buying treasuries with a minuscule yield and a declining dollar. Hard to keep the stimulus pumping if no one wants your debt, which leaves only monetizing as an option and the systemic risk that represents. But hey, retail sales were up 0.2% so everything is good.

I am starting to reconsider my UUP position, but in the light of the fact that my Gold/Silver is offsetting it I will hold for now. I look at Dave's charts and see 76 on the USD as a line in the sand. That breaks and we are off to the inflation/devaluation races.

Good Luck all.

Thursday Outlook: Commodities, Global Markets

Shanghai is up almost 5% on better than expected lending news; US market futures are green. Looks like Tuesday may have been another dip to buy. Let's see if the bulls are able to grab the reins and drive the markets higher.

Personally I am still fearful (while others are greedy) and even if the market surpasses its most recent top I have no faith in it and continue to sit safely on the sidelines mostly in cash, a few longs, some Gold and Silver and some UUP, waiting to see if reality ever decides to set in.

I can say its difficult to remain disciplined with the casino mentality of the market today. I briefly flirted (in my mind) with jumping into the dash for trash. Thankfully I did not and saved myself some money, a lesson that didn't cost me anything and restored my discipline to be patient. Sooner or later the S&P P/Es will return to the mean (and somehow I doubt that will occur by the "E" actually increasing to reduce the high multiple). Until then I wait.

Good Luck all.

Wednesday Outlook: Commodities, Global Markets

Although there is a high inverse correlation between Gold and the USD (for the obvious reason that Gold is most commonly quoted in the dollar), if we see a significant pullback here you could see both rise in a "flight to safety" as the goldbugs go to their preferred bunker and the institutional investors search for safety by buying treasuries.

Personally I believe a pullback is inevitable, already China is turning down the stimulus spigot (in the form of credit tightening) and its only a matter of time before the US is forced to dial back its own largesse. Anyone that believes that the stimulus has been successful in jump starting the economy is likely blinding themselves to the fact that nothing really has been repaired, and once the punch bowl is removed the economic engine will likely sputter and died.

But the question is when. You mentioned that we are seeing a reversal in behavior as good news is being sold off. We are seeing another battle between the momentum bulls and the fundamentalist bears. The bulls could win another battle here, but the war will inevitably favor the bears in my opinion, since all this stimulus has accomplish is a redistribution of wealth, not any ongoing growth.

Personally I am being very careful in any equity longs I have remaining, with moderate positions in UUP and in CEF (Gold / Silver), which represent good risk/reward to me. The rest remains in cash in the expectation of a return to deflation or low inflation for the next 12-18 months. I'm also considering moving a bit into TLT but its risk / reward is less compelling to me than the other two.

Good Luck all

Thursday Outlook: Commodities, Global Markets

Hi Dave,

Yesterday I asked you a question if you are aware of any short ETFs that do not have the decay that results of tracking daily performance. I am getting pretty bearish on the market and I am looking at what I can purchase to profit from a long drawn out down trend. My first consideration was SH (1x inverse S&P 500), but of course you can quickly see by looking at a 1 year comparison chart that even though the S&P 500 is down about 10% YoY, SH is down 20% YoY. Its worse with the leveraged instruments.

I am considering buying UUP (Bullish US Dollar ETF) since I expect the dollar to rally if the bear returns. But I was wondering if there was anything else you would recommend as an investment for a long slow down trend (similar to a 1930 - 1932 scenario).

I will caveat my above statements that I do not necessarily believe that these things will come to pass, but I see bad portents and I want to be able to position myself appropriately in my accounts when the time comes. Until then I am slowly cashing in my longs as the rally continues, which I feel is prudent from a risk reward standpoint.

Good Luck all

Wednesday Outlook: Commodities, Global Markets

Hey Dave,

A question for you. Any ETF that seeks to track the daily performance of an index suffers from decay if you hold the ETF long term. These effects are exacerbated when the ETF results are leveraged. This is generally understood by experienced traders, but poorly understood by retail investors, which is the reason for much of the angst towards these instruments.

Of course, for 1x Long performance you can always purchase a spider like SPY to avoid this decay. But if you were wanting a short version, do there exist any ETFs which do not have this decay?

If so, that might be preferable to shorting which requires margin and has the risk of unlimited loss, whereas an ETF limits the risk to your investment.

Thanks!

Thursday Outlook: Commodities, Global Markets

I've started to take profits on my longs that have skyrocketed, and I continue to hold on to any laggard longs with the belief that people will realize, hey, they've been left behind and that is unacceptable, everything must be overvalued, good, bad or ugly.

It amazes me that despite the ho hum news we continue to rally well above 200 MAs. I guess I could be leaving the icing on the table but I've already had my cake.

The big concern I have is that no one is talking about Back to School nor Christmas yet. Back to School is going to be especially hard compares since the consumer really didn't get hit by the recession until 4Q. If that impossible situation can be spun positively, well, then we will truly be living on Fantasy Island.

You add in the fact that oil is back over 70, commodity prices are skyrocketing - that is taking more money out of the consumers pocketbooks. The market can remain irrational longer than one can remain solvent but euphoric panic buying, short capitulation and even GS's HFT can not buoy this rally indefinitely. The NYSE McClellan Index and NYSE Summation Index charts are especially telling.

Good Luck all