Thursday, June 21, 2012

Markets Hit By BullS--t.

For the better part of last seven days I am writing about a day like today.  From “ BullS**t Ad Infinitum” on June 14th till yesterday, I have been urging readers not to get caught up in the meaningless gyration of the stock market and for those of you who cared to listen, congrats for being in cash and safe. This is my two pence service to the ordinary investors who are regularly taken to cleaners by the Wall St. Pandits and various talking heads.

I have written on last Monday that if SPX holds 1300-1320 level by this weekend, we will see a higher high. It was a bold statement at that time, when indexes were ripping higher to talk about a lower level. And yet we are almost there now. Yesterday I wrote about 1365 by 1stweek of July and a reader asked me if I meant 1265. I really meant 1365. May be even higher, up-to 1380. So it is a bold statement even now but  1st we wait to  see where it ends in a day or two. Tomorrow we might see a dead cat bounce before some more selling. Ideally I would like it to fill the gap on the way up which I have circled below.

As much as the up move was a fake move, you cannot trust this down move either. Basically we have been in a range for quite a while as highlighted by the rectangle.

How the folks are going to react to today’s selling? Till yesterday, there were talks of end of correction, start of new bull phase because the market did not sell off after the QE disappointment. Will they short the market again now that GS has recommended its clients to short the market with a target of 1285? If GS has recommended a short trade I would rather take the opposite route, more so when short term cycle is indicating a bottom tomorrow. Let’s keep in mind that cycles are not an exact science and the bottom may well come next week. But taken everything together, I do not expect a huge sell from here immediately. As I said yesterday, there is still Quarter end window dressing to be done and beginning of the month 401K money to be stolen.

I am holding to the GLD for now to see where it goes till the 1st week of July. I kept it as insurance, just in case Bernanke went crazy and declared QE. I do not expect it to do much till August but if gold falls below $1530, I will get out of it. On the other hand, I am thinking of taking a short position in Bond through TBT. That is going to be another long term play. Despite every effort Bernanke is making to keep the interest rate low, it will soon get out of control. Either interest rate goes up or inflation goes up. Bearded one has painted himself in a corner and may have only six more months. You see, I am more generous than Soros. He gave three months to the Europeans. I am giving six months to the Fed. I think it is going to far worse than what we have seen in 2008. This time there will be no country in the world to print and save.

I got quite a few response / email to my last night’s trivia and I must confess, you guys know your history. To sharpen your understanding of history, you may want to read the book” This time is different” .

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