Monthly Archives: November 2009

Deceleration

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Compared to Friday's half-session, today was pretty much a snoozer, except for the oh-so-irritating run-up during the last hour of the day (naturally).

I remain fully short, and I bumped up my positions in several dozen cases. I intend to get a lot more aggressive once we see some fracturing start to really take place. For now, I am content to simply be "in position", measuring 5 on a scale of 1 to 10. One important index that I'm watching, which I've mentioned many times before, is the semiconductor index. This thing has "top" written all over it.

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Far broader, and more important, however, is the S&P 500. I've done an illustration like this before, but I'm struck by the sheer loss of momentum. To illustrate this, I've drawn an arrow from the base of each prior rounded top thrusting up to the first higher high. You can see how the thrusts are getting weaker and weaker, and how this more recent topping pattern is deep inside the range of the prior one (which wasn't the case for its predecessors).

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Tomorrow morning, the manufacturing index comes out half hour after the opening bell. That will probably give the market a bit of direction, especially without any end-of-month weirdness.

Protective Life

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Today is a strangely boring day, and I was having trouble thinking of what else to talk about. So – what the heck – I decided to find out which of my positions was the strongest performer so far. The answer is Protective Life, symbol PL, which is down about 25% from where I shorted it. This is my favorite kind of chart – – one where I can just keep updating the stop and hopefully watch it grind down for as many months as possible.

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Is RTH Worth Shorting?

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Perhaps the most confounding trading instrument to me this year has been the RTH, the retail holders trust. Of all sectors you think would be weak, it would be retail. We have record joblessness, crushed consumer confidence, evaporating credit…………and yet Americuhns just keep buying crap they don't need with money they don't have. Incredible.

I am frankly reluctant to touch this hot stove again, but I bring it to your attention nonetheless.

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Small Caps

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I confess that yesterday's not-too-surprising announcement from Dubai that everything would be juuuuuuuuust fine had me a bit concerned, but it looks like the damage is here to stay. In particular, I am still madly in love with small-cap shorts. Even as most indexes and commodities are thrusting slightly higher, the small-caps have been reliably weaker. I have doubled my position in SDD, the ultra-bearish small-cap ETF. Below is the IJR, which nicely illustrates the set-up for small caps on the short side.

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