First and foremost I just wish to clarify anyone who goes on TV and makes claims like “the market is down on the news out of Saudi Arabia” or “this selloff is overdone” is an idiot, pundit, and couldn’t reason their way out of a wet paper bag. To the first point, the market was down before the news that the Saudi’s were shooting protestors hit headlines (as an aside: as stated before, that was clearly a WHEN not an IF event). To the second point, we may indeed go up tomorrow, but to call a selloff overdone 1 day into a selloff is nothing short of retarded. Sometimes I wonder what is more frustrating, the tape or moronic TV pundits – then I realize people actually buy into that garbage and fear for the future of the human race. As a final note on the middle east, simply because the average person in the west, and therefore our media, doesn’t have the ability or inclination to pay attention to a problem or event for longer than a few days (this is probably very generous) does NOT mean it ceases to be a problem.
With regards to market action today, I saw a “flight to safety” as everything from equities to precious metals sold off and money poured into bonds and the US dollar. Counter intuitive i know, but it seems the deflation trade is making a come back, at least for a while. How the US dollar will fare is anyones guess in the longer term, but with other countries moving to tighten monetary policy and turbo Ben at the helm I can’t see the US dollar appreciating significantly. The trannies weathered today relatively well, compared to the other indices. The semi’s took a kick to the groin for the second day, and they have been market leaders. FCX, another market indicator, sold off. The SPY tested the 129.80 area again, and closed close to its low on huge selling volume. Furthermore there are fewer actionable setups underneath the broad market carnage. We are oversold by some measures, but remember that markets can remain oversold for as long as they can remain overbought – aka A LONG TIME. A final thought to consider on the broad market: assuming we have a 2% up day tomorrow – which I deem as really unlikely – how comfortable are you going into the weekend leaning long with who knows what news to come out of the 17th century… By which I mean the middle east (although it hasn’t been headline news, with a strong insurgency, massive floods last year and rising fuel prices Pakistan isn’t looking all to stable these days, even by its own retarded standard – did I mention a massively corrupt and incompetent government?).
If you are a regular reader you have no doubt surmised that today was a painful day for me personally. My SPY puts were no where near enough to offset the clobbering I took in SLW, GLD, NGD and GTE – I sold BG early on as I tire of watching it decline and feel that the agriculture phenomenon will me muted for some time (until it hits the media that people are, in fact, still starving). On the plus side I managed to add some SLV calls at close to the bottom and was up on that position by days end. I will continue to raise cash by trimming – likely NGD will be the next to go – and pour it into precious metals should they continue lower. For those of you who consider gold overvalued, consider that it is down year to date and then ask yourself if that makes any sense in light of how the other commodities are preforming and how cheap money is (they are practically giving it away).
Today I traded FCX almost exclusively, as it presented many opportunities to get long and short. My one observation is that the level 2 on this stock always seems a little thin, so I found myself watching the time and sales. Below is the chart that I used to aid my trading.
Thanks for taking the time to read my thoughts, feel free to leave some feedback.