Daily Archives: June 14, 2010

Bull Fail

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Well, today was pretty interesting to watch. Bullishness has run wild on Slope, with even die-hard bears proclaiming Buying Stocks being the only way to go. My portfolio remains pretty tilted – – 105 shorts and 23 longs – – and I'm dreading the prospect of many, many weeks of grinding higher. It would take something relatively earth-shifting to give the market what it needs to shatter this month's lows; I think the best I'm hoping for is a continuation of today's dip in order to exit some more shorts.

But I remain firmly on the fence, if that is possible. The bulls had a lot going for them today…….a surging Euro; the day of the week ("Mondays are always up!"); presumably rock-bottom sentiment that should drive prices higher………..the works. And they squandered it. The /ES was exploding higher earlier today, but it farted into a shooting star pattern, coming within 1.25 points of 1103 resistance. The Russell 2000 didn't even manage to get as high as its own resistance level.


So I'm still as skeptical about what's next as I was this weekend, although today's complete fumble on the bulls' part is a tiny, tiny bit encouraging. The NYSE Summation absolutely scares the Abby out of me, which is not a good feeling. So I've taken my foot off the throttle and am down to a 66% commitment of my cash into positions, less than half of a week ago.

So Which Is It?

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It seems to me this week is going to determine an extremely important question: whether the market has exhausted its rise already, or whether it has several more weeks or even months to go.

I have almost zero doubt in my mind that the market is going to plunge to 925 on the S&P in the coming months. What I'm totally uncertain of is whether the run up is pretty much we're we are at now (see the middle horizontal line below) or if there's another meaningful push higher (the upper line).

The lower horizontal line, I am confident, will be broken with gusto. When that happens – – and it could be as last as this autumn – – is the big question.


A Safer Bounce Play

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With the exception of those who bought on June 9th, virtually everyone who purchased BP in the past seven years is in the red on their position right now. Today's nearly 8% drop shows how treacherous this beast can be.

I find RIG to be a much safer "post-spill" play, with a stop at 44.04; I acquired a fairly large long position on this earlier today.


Freedom From Fear

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I am currently re-reading Freedom From Fear, the superb history by David Kennedy of 1929-1945 in the United States. I emphasize re-reading, since this sucker weighs in at 900 pages, but I'm a history buff, and the Depression and World War 2 is at the top of my list of interests.

I'm halfway through this tome at this point, just before the attack of Pearl Harbor. I can share a few thoughts off the top of my head:

+ Roosevelt was much more hamstrung by an uncooperative Congress than most people remember. It's incredible he got as much done as he did, particularly in the late 1930s.

+ People think of the French as the pathetic do-nothings in World War 2. They don't hold a candle to the people of the United States, which watched apathetically as Ethiopians, Chinese, and Jews were slaughtered. The isolationist/pacifist attitude of the United States was, in retrospect, revolting.

+ Thank God for Winston Churchill.