A WELCOME RALLY

A welcome rally for bulls and in some cases bears as it allows them to reload short positions. In any case I feel this rally may be very short lived considering the economic data releases on the horizon . Producer Price Index and retail sales tomorrow along with the New York manufacturing report. Consumer Price Index and and Industrial Production reports on Wednesday with Housing Starts and the Philly Fed survey on Thursday followed by Option Expiration on Friday. This will be one busy week and probably highly volatile. I am already excited !



Currently I am long QLD while betting against financials via SKF and housing via SRS though I lightened up on both these positions last week.I will look to add more SKF and SRS if we rally hard this week. Took some of the table on GLD today. I am looking for a pullback in Gold leading up to the Fed meeting. I have been long GLD from $58 with an average cost of under $65. Selling above $89 is prudent . Agriculture is having a phenomenal run as of late with my position in the agriculture ETF DBA soaring. I believe DBA will be one of the best plays for 2008.



Here is an interesting chart courtesy of Headline Charts showing a market sell signal via and S&P 10 week and 40 week moving average cross over. This signal appears to have accurately predicted the Bear market of 2001-02 and the bull market starting in 2003.



If one wants a accurate predictor of where the markets are headed, keeping an eye on what the institutions are doing is key. This chart via Stocktiming.com shows the Institutions are reducing expsoure to equities.



There are 71 technology stocks in the S&P 500. Not a single one is above its 50 day moving average. This chart below from Bespoke Investment is incredible to look at.







Yahoo is the only S&P tech stock up this year ( as of this morning). Amazing. This can be looked in 1 of 2 ways. Either tech is oversold and a great buy here or tech is weak and will continue to get weaker. I personally believe tech will continue its downtrend though the above tech names could all rally in the next week or 2 towards their 50 day MA. Hence I am long QLD which is a bull ETF modelled on the QQQ x 2 . Since the Qs are mainly tech stocks, I believe a tech rally can be played best by utilizing QLD though some would argue ROM is better since its a bull tech sector ETF. ROM however does not have enough volume for my liking. Too illiquid for me.

MARKET UPDATE

This is starting to look, feel and smell like a bear market. The financials have been in a bear market for quite some time and today ETFC is being axed. Nevertheless , I am going long E-Trade as I believe the selling is overdone and things are no where near as bad as some people would make you believe. If things were really as bad you would see the insiders dumping and that is not the case.

I sold 60% of my HANS today above $48 with hopes of buying lower $40-$44. Added more SLV under $146 and a little GLD at $79ish. I cut back on some other positions as I approach 30% cash with hopes of deploying it once a clearer trend become apparent though it seems that trend will be to the downside after a bounce. If we can't rally in November we are in a bear market.

Recap

Today was a pretty horrible day to be long. The Dow, Nasdaq and S&P were down 1.37%, 1.07% & 1.29% respectively. Volume was extremely heavy with banking, housing and utilities taking it on the chin. Advancers were outnumbered by decliners 3-1 on the NYSE. Small caps didn't do too badly today with the Russell 2000 down only 0.6% which is comparative outperformance to the overall markets.

Some winning stocks today included BX JBL M SMSI SOHU. The stocks getting beaten up included QTWW INPC ALTH VRNM ZN NUAN.

Today was a good day to have plenty of QID SDS MZZ DXD SKF stuffed away. You never know when these hedges are going to come in handy.

Gold did really well today with my GLD position closing up . Its about time gold seperated itself from the overall market.

Blackstone Group's IPO was the main story today with the stock jumping over 20% at its open before settling down at the close. Forbes 400 members Schwarzman and Peterson are now both billions richer and laughing all the way to the bank.

With the volatility in the markets in recent weeks, cash is king . Wait till the market regains direction and then deploy the cash towards profitable use. I am glad I decided to liquidate some long positions a few days back. The extra cash can either be deployed towards inverse ETFs, puts or shorting stocks in general if a bear phase commences. On the other hand if the market regains its upward tilt than I can load up on some strong trending stocks like SNDK HANS MU NTRI PRAI OVTI BIDU and bull ETFs like DDM SSO QLD MVV UWM.

Right now I feel worn out. Exhausted like I've run a marathon wearing a 500 lb body suit. Its really hot here in Arizona. You step outside for a second and feel drained out. The sun zaps every ounce of energy from your body.

Gold and Silver

Gold and Silver and their respective ETFs GLD and SLV are taking a beating today. The trend for both seem to be up and while there may be continued weakness short term, I am taking this opportunity to buy more.

MARKET UPDATE

The bulls are running wild today. The home construction news was a boost to the market though I hardly believe that the bottom in housing is in.

In retrospect I feel foolish selling a good chunk of my ultra bull ETFs - QLD etc while adding to the ultra shorts QID etc. Miraculously despite my fund being biased to the bearish side I am actually in the green today with gains in GLD - gold ETF while some of my long positions have been running wild such as SNDK and COGT. I figure if the FED continues to pump liquidity into the system, gold will benefit and thus GLD is a good hedge to my ultra short positions.

On days like these I am Jacks smirking revenge .....

Gold breakout

Gold and GLD are breaking out . I would expect a test of $730 and more. $1000 gold is a distinct possibility this year.

WEEK 1 2007

1 week down (almost) 51 to go. Where does this put us ? What strategy does one pursue in the coming weeks ? How does one preserve capital yet maximize gains and etch out absolute returns in the double digits ? If I were not looking for double digit returns I would not hesitate to switch to the money markets at 5%. Iceland is offering me 13% for my money. The Chinese Yuan is a safe bet assuming the continuation of appreciation vs the US Dollar. The Euro has broken overhead resisitance in recent months and is heading for all time highs vs the USD. It looks to be a good safe haven for capital. I like Gold too in the form of Goldtrust Shares as it settles along support.

Job growth rose unexpectedly which has dampened investors expecting a Fed rate cut.If the economy continues to show strength , a rate raise would not surprise me. When was the last time the Fed lowered rates into a rising stock market ? I don't know but all I do know is that when the Fed does decide to cut rates, it will be to the backdrop of investors fleeing the US equity markets.