Recently in traders Category

Unless you have been hiding in a Kush mountain range cave like Osama Bin Laden (if he's still even around), then you have been hearing about U.S. and global equity markets reaching new record highs. If I'm not mistaken, I heard on CNBC this morning that the DJIA has hit a record high some 40+ times in 2007 whlie the Chinese Shanghai index has closed at a record high more than 70 days this year, including yesterday. So where do we go from these record highs.

The theme this week will be continued strength in the Dollar. This short term strength will stall many of the rallies we have seen in commodities including but not limited to the Grains, Energy, and Metals. You will see an overall contraction of the CRB index. We see this as healthy and in fact necessary to sustain these longer term up trends. Be patient if you are attempting to buy these dips.

Sadly, what we now need, to avoid a recession, is a good war: unfortunately, we are already so involved; but a good war is the only way to spend our way out of a possible recession; hence, we’re obliged to either increase the war or, to start another war. Wars are inherently good for the economy.

The tourniquet has been applied but how long before the 'bleeding' problem is repaired? True, the infusion of liquidity into the system successfully stalled the inevitable resolution of some of the finest, most creative packages of loans that ever been seen in all recorded history. The problem with tourniquets is that although they provide a quick-fix to a possibly fatal injury; they are a momentary, not a terminal solution, to the problem. We need to see the problems properly addressed and properly resolved.

There is a preconceived notion by the general public that when the market is making new highs, everyone is happy and when the market is headed lower, everyone is crying. Although this is an epic generalization, it describes what I have noticed as the general public’s perception. Some of my friends who are not in the financial industry, but know that I am, ask me “Did you see the Dow was up 150 points, I bet you are happy”. Well, no and yes. My personal stock/mutual fund portfolio might have done well that day, but that does not mean I am happy with the gains. I also have to consider our fund which takes a market-neutral approach. Instead, I look at it a different way (but in the long run, it is all about gains and losses).

After a dramatic pullback off of new highs, the S&P 500 is now consolidating the gains made over the past few weeks. We continue to see signs of a pull back. We are not expecting an end of this rally just a normal correction within a larger bull market. We see a pullback of roughly 3-5% within the next two weeks. Buy at the money puts or short futures with stops above the all time highs.

Bonds sold off all the way to 109 which was a bit further than we had expected but see continue to see this market stabilizing and even bouncing from here. We are targeting a move back to or above 111 in the next few weeks.

Who’s on for the rally ride?

In today’s information driven society there never seems to be a dearth of data to rummage through and analyze. Because of regulations and the internet, much of the data is public and can be found by using some simple search methods. In the financial world, analysis is key in making decisions on certain stocks, sectors or industries. One report that has been readily available since 1962 is the Commitment of Traders (COT) report.

Now, the abysmal retail sales numbers have been attributed to those individual investors, who're thoughtlessly throwing money at an already overbought stock market. Well, perhaps it is a thought, however justified. But, from where we sit, we see money chasing money, raising it higher and higher, yet buying, every dip. Now, we've expressed a concern, we are obliged to admit that we do not yet see any topping of this mania, which, absent a different time sequence, which isn't there, must surely end sadly.