I'll close the day with something utterly trivial, but I need to get it off my chest.
A recent edition of a thrice-weekly online publication mentioned that the cover of Business Week featured a bear on its cover. I couldn't find anything bigger than a postage-stamp-sized version of the cover, but here it is, scaled larger:
I'm a big believer in the contrary nature of national magazine covers. What irked me was that the aforementioned publication citing the cover stated that the article within Business Week had a "rather dismissive undertone", and thus the cover really didn't have any significance.
Look, I'm the bear's bear, but you can't have it both ways! If someone is going to cite an anecdotal indicator, you can't cherry-pick things so blatantly that only instances of your bias are valid.
Of course, the cover indicator isn't infallible. Business Week had a very prominent cover story in August 2009 that the recession was over, and frankly the market hasn't keeled over yet. My point isn't that the cover indicator works or doesn't work; my point is that consistency promotes credibility.
Over the past five sessions, the bulls have run over the bears with absolute impunity. The double bottom on May 25 and June 8 set up the bulls for a charge higher, and the more I reflect on it, the more I realize how WAG – – first predicted on May 25th, in fact – – was correct in the first place. I wish I had listened to myself more.
Let's take a look at my original scribble:
What caused me and many others to doubt that WAG was unfolding was that the market dipped toward the May 25th low again. This depression of prices since May 25th – which I called the Kagan effect – prevented any real breakout until today.
Just for fun, let's take the price movement since May 25th and shift it upward enough so that the retracement stays above the breakout point. What does the graph look like then?
If we compare this "un-Kagan'd" graph to the original one, it looks like we're getting close to realizing WAG's push higher. The hedging I did was very constructive – – longs such as RIG, EEFT, MCO, and others have been very helpful – – but my portfolio remains tipped bearish. I've got 97 short positions, 18 long positions, and 1 ultra-long (if you consider TBT to be so). My two biggest positions are a SPY long and a IWM short.
Energy and the Euro is driving everything at this point, so it'll be interesting to see what President Spock says tonight.