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Thursday, September 10, 2009

Market Thought... leading

The market is so very excited, climbing that 'wall-of-worry'. But at current levels, the more the market rallies, the more I will be selling my holdings while maintaining the market short position. (Then I will buy the sold positions back on a pull back.)

Individual stocks are overbought, with a market that seemingly will not quite, is triggering my selling. For instance, I sold PWR today. I love the name, especially after it purchased Price Gregory. Also, I was shocked to get my limit order filled with CHK at 25 filled today. (I do not pass up 17% moves in 4 trading days. But I will definitely buy it back after a consolidation, do not care if it consolidates higher, so long as the risk of sudden collapse is gone.)

At the moment, a key leading indicator (the Semis) for the market are very bullish, but very overbought. And now they are in the position to have run up, too hard too fast, not justifying their current valuations. Basically, IMO, a pull back is imminent.

As a leading indicator goes down, the market will follow.

Something I found strange today, was the 10yr yield. It declined today. With such a market move, the yield should not have declined. It declined so-much-so that it is in the position to break down from its support and enter a negative trend.

This goes against the theory of entering riskier assets. With greater stability, money should be moving away from treasuries (safe investment) and into the market (riskier investments). Unless anyone believes we are getting a free lunch w/low interest rates and a rising market, while the global economy is still in fairly rough shape. If you do, you are wrong... we are not in an economic sweet spot.

If the support breaks, and it looks like it will, the market should be moving lower.

Then there is the VIX. It is now oversold (complacency), and sitting on support.

Usually, as the Vix rises the markets fall.

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