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I've been a Utilities bear for quite a while, and my XLU short position (and long put position) is really starting to kick in.
Regular Slopers know that I stopped using the thinly-traded SDP as an instrument for this idea, and I must say the XLU is working out quite a bit better.
Waking up to an /ES down 26 points is a pretty pleasant way to start the day if you're short (it's 20 minutes before the regular opening bell as I am typing this). I confess that I am so shell shocked from prior explosive rises that I have taken my /ES profits on my 30 contracts even though the next retracement level is an additional eight points lower from here.
The truly curious item to me is gold. I used to think that if (a) EUR/USD was down hard; (b) OIH was down hard; (c) equities in general were down hard, that gold would be getting bludgeoned. This isn't the case at all, even though all three circumstances are true this morning. Gold is absolutely soaring, and I've got plenty of precious metals shorts (some of which are sure to get nuked the moment the market opens).
My charts definitely indicated an overextended market, and the "cause and effect" relationship I thought was in place would have, I thought, helped my cause. But gold is clearly in its own special bull market (and hats off to Gary Savage for beating the bible on this point) in which I am wrongly positioned.
Once again we're at the bottom of the ~70 point S&P range on the /ES.
I'm forced to wonder what would happen if we ever broke 800 with any gusto. Recent history suggests it would, for the zillionth time, push back higher. But this range can't last forever. This week – particularly with "Mortgage Forgiveness Wednesday" – should be another interesting (and hopefully not agonizing) one.
After my recent griping about bailing out the "nimrods" who bought at the top of the market and could wind up having part of their principal forgiven, I received the email below from a reader. I clearly painted with far too broad a brush, and I appreciate this input from someone actually in the thick of this mess to show me things aren't as black and white as they appear.
Our family moved to Oregon a year and a half ago for my husband's work. Our home, a 16-acre walnut ranch 45 mins. southeast of Sacramento, has been on the market for two and a half years. Since we've been gone, the house has only been rented out 9 months. There are no renters, even with price reductions. Stockton has 10% unemployment and our ranch is 30 mins. away. This year the price of walnuts fell 50% so we're barely covering production costs.
It's taken four realtors, numerous price reductions from the beginning (much as in pains me as a trader to say so, yes, we chased the market) to finally get an offer, a SHORT offer. Though we bought at the right time, nearly nine years ago, our ranch is now being sold 66% below what it was worth two years ago. We are walking away with nothing, even losing what we put into it, even though we tried to sell it a year before the market began to fall apart.
We intended to hold onto it through this decline, but as this is going to take years to recover, we can't rent it, and walnut prices have bombed, our lawyer and CPA have told us to get out and take the hit on our 800+ FICO scores.
You are a very intelligent guy, as is Dylan Ratigan on CNBC, but frankly I resent both of your uninformed observations that people losing their homes are "nimrods" and "stupid people who bought houses they couldn't afford" (Ratigan).
I worked in television news for years in Fresno, where I graduated from college. Over the years I got very tired of reporters and anchors who would get in front of a camera and pontificate over issues they were less than completely knowledgeable about. Your blog is your camera, Tim, and I am very disappointed in you.
There are a lot of people getting hurt in this fiasco, more than just "nimrods" and "stupid people". WE didn't create this housing debacle and yet, like an atomic bomb that keeps killing people years later, we are part of the fallout.
As my grandmother used to say, "They don't need a gun to rob us," OR our three children.
