Battle Plan

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Three months ago, I wrote this post about how we were in the final leg of a “runaway” Russell 2000, and in a supplementary post for Slope+ users, I wrote that “This projection also puts the top rather far out in the future – like late September or early October of this year.” Well, we are now “rather far out”, and the question is obviously whether or not this is the top or simply the 1,385th speculation of a top that doesn’t materialize.


Over the past four brutal years, I have become more and more cautious about calling tops. I am seeing a lot of terrific traders throw their hands up in disgust and frustration (indeed, Mark St. Cyr’s final post is waiting in the wings as he, like Strawberry Blonde, is riding off into the sunset). And ZeroHedge, a favorite read of mine multiple times a day, has made a fine art form of pointing out the Big Event That Is Finally Going to Start It All..………and it never does.

The debt ceiling crisis we’re facing right now has been, for many months, The Big Kahuna according to ZH. It was supposed to put summer 2011 to shame. Ummm, let’s check on that:


So in 2011, about 25% of the Russell’s value was laid waste in the span of a few weeks. How about right now? Well, the Russell hit its highest point in human history this week. So there doesn’t seem to be any Big Kahuna here at all.

So guess at this point is as follows:

  1. Sometime between now and October 17th (which is the expiration date for the United States), some stupid-ass bargain will be made. Neither side will be happy, both sides will speak about the compromises they had to make for the good of the country, and Boehner will retain his well-deserved reputation as spineless.
  2. The markets will instantaneously explode higher, taking the Russell to another lifetime high. This rally will probably last, as with the non-taper rally, into the next day.
  3. The market will finally have reached its peak, and there will be no more “good news’ (in the form of something NOT happening) to be had.

I don’t relish the above, because I am not excited about the prospect of holding on for another stomach-churning lurch higher. The opportunities on the short side seem spectacular to me, but I don’t think I should get really aggressive until the final retard-o-ramp transpires. Until then, we’re just going to continue to get bandied about, this way and that, with every little rumor and denial. I can’t wait until this crap is over and done with.