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SPX, daily
SPX 1159.73

I am back... and it seems every time I decide to write about the markets it's either we are at a crossroads or I have too many questions that I am failing to answer.

Just to let you know that the MON short worked like a charm and I covered my short this week around 59$. I would have preferred to let the trend run its course and cover at a lower or a higher price when the situation warrants it, but scarcity of capital forces me to redeploy it in different opportunities that may offer better reward vs. risk.

Where are we heading? Or more exactly where are we now?

It seems that the mini crash of last week was in no way related to a human error or any single factor, the markets were simply overextended and traders as well as investors were turning complacent. Unfortunately, Greece debt woes brought back a lot of painful memories and everyone decided that its better to let go than to relive the whole subprime crisis over and over everyone headed to the exit at the same time and boom markets were nose-diving in an matter of minutes...

Whether a top is in place and the secular bear market has resumed its course or it’s an excellent buying opportunity (give or take 50 pts on the S&P500) no one knows for sure. All I can see is that the prevailing trends are still in force. 

Long USD vs. EUR, CHF, GBP
Short USD vs. CAD, AUD
Long Gold

As for the equities markets things are a little bit more difficult to assess, at least for me.  

The bailout plan proposed by the EU nations failed miserably to stop any excessive speculation on the depreciation of the EUR/USD and after a short lived rebound to high 1.30, the currency pair gave back all of its gains in one single session and came back to trade around the 1.27 mark. Trends remain in force until they reverse; it seems that this trend has still some legs to run so better ride it.

I wish things are always that simple. Unfortunately, we all try to outsmart and outthink the market so we take positions that are generally unwarranted just to try and buck the trend, confident about our timing and trading abilities. These trades, product of our intelligence and forecasting abilities are generally the ones for which the risk management process breaks down. All because you have the need to say to yourself and to others that you can beat the game all the time, which is far from true. I compare this situation to the one where a skillful poker player that has an edge in beating the game throws away all his winnings in a craps shootout, because he lacks the discipline and patience and doesn’t know how to sit on his hands.
If I leave it to my gut feeling to do the forecasting for now, I think that the equity markets will need to drop by another 5-10% before the uptrend resumes. Too many week bulls are still in the market or came back yesterday after the massive rally hoping/thinking that the panic sell off has washed away all the unworthy.