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10/20/2010

 

Market Forecast:

  • overcast in US equities, light clouds in Asia

General:

  • My market outlook in this current economy is bearish. Inflation, measured by several independent sources, is reported from 4.4% to 8.5%. The Fed reports it at 0.8%, and is taking actions to increase it through “quantitative easing” and other measures. A 2% increase in the Fed inflation could easily push real inflation past 10%. Commodity prices along with foreign markets have set new much higher 2 year highs, while the SPX is still below the Apr10 high. Many of the companies reporting earnings now are touting foreign profits as a major reason, which is further proof that the US economy has not recovered yet and consumer sentiment and spending is low. GDP in other countries had also taken off in 2009
  • SPX is up ~.6% in the past 5 trading days, which have also all been above the 20 day average volume. The SPX has not touched the 20dEMA since it broke above it on 09/01/2010. The question at this point isn’t ‘Where is the market headed?’, its ‘Can you time it?’ The market is obviously long over-due for a correction, and the longer it is put off for, the more severe the correction. UUP is extended to the -2vb(1yr) and SPY is past the +1vb(1yr). Bonds (NYSEARCA:TLT) have begun to sell off, so the SPX should follow soon. Any longs should be protected via stops or preferably, options, and shorts should be ready to be initiated. 
  • Due to Japans macro problems, such as their currency being at a 15 year( I think) high vs USD, which hurts their exports, and the amount of elderly vs working people, and where that trend is going, I think when this market turns, EWJ(Japan ETF) will be one of the harder hit. 


New Positions:

  •  I think the market will make a last move up, possibly to marginal new highs before the big correction, so I am carefully watching for that and then a sign of weakness or negative news to re-initiate the UUP position and go short SPY along with some sectors which I have not decided on yet, most likely something with gold, tech, and  financials or utilities

Closed Positions:

  • UUP - 
  • TBT - TLT didnt sell off with SPX rally today, hate bonds


Disclosure: Long TBT