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Thursday, June 4, 2009

Market Thought... nimble

Such extremes going on in this market at the moment, but I really do not know why. Here are some of the reasons I have read or heard about...

A case for the market to keep rallying:

1. Markets will keep going up (melt up) because of institutional investors needing to not lag the benchmarks. (IMO, this is bullshit, but okay... since I am not a Wall Street guy I guess I have to accept this for the potential of what it can mean.)

2. Dollar keeps declining (or currencies globally collapse) so markets will rise. (A function of economic math. I happen to think a global currency collapse will start WW3, and is the absolute worst thing that can happen, as there is very little fiscal medicine to alleviate such a wide scale collapse.)

3. Earnings growth is coming back. (Utter bullshit. Earnings growth was a function of cost cutting. Revenue growth is needed for a sustainable bull market, and we are simply not there.)

A case for market head winds:

1. This rally is being fueled by inventory replenishing. After inventories are built up, what will be the driver of growth with the consumer still loosing jobs and the savings rate up to a 14 year high? (a strong case for a sideways market)

2. Inflation gets out of control, the Fed and Gov, will utilize their tool by quickly raising rates and increasing taxes. (IMO, this takes care of the potential currency collapse, but the market is also a function of interest rates... the market is not so nicely valued if 10yrs Notes are yielding 7%)

Because at this stage of the game and the market's already massive move, I continue to be nimble. Short-term (pseudo day) trading where I can, but overall I have no real conviction here. Unfortunately I am a sucker for fundamentals, but luckily I trade on technicals.

At the moment, the current trades I have going...

1. short oil via the USO. Will cover it when crude sees around 63

2. Long Nat Gas via UNG (will close it at 17-18)

3. took on a position in SQM (will close it with a 5-8% move upward, its overbought but signs that it may get more overbought tomorrow... also would not mind holding this one for the long-term... great ag and Lithium play.)

4. F... was able to get it at 5.98, and it may breach its mid 6 resistance as it gets more overbought. Will close it with its strong burst through that resistance point, assuming it breaks.

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