Fade to Red

Even the most pessimistic bear must still be sitting at home overnight shivering at the thought: “Will Ben ‘Helicopter’ Bernanke consume of a blizzard of cocaine tonight”. What I mean is in the near future while there are still about 20 days of POMO left, when will Ben shred those who held shorts overnight by waking up to the S&P screaming higher?

I’ve predominantly left the market. My long holdings account is 100% cash at this point, and I’m holding 85% cash in my aggressive account. It seems like we’ve established a small downtrend here (not an actual bull market reversal) just what many believe is a slight step down before with find solid consolidation within a range for the summer – or until the QE3 helicopter takes off or worse interest rate hikes (yeah right…). We could even head towards the 200day of the S&P at this rate; with two strong bearish candles plowing through the 150day seen below.

So while being weary of the “futures fuckery” pattern since February, I’ve been looking for companies that immediately need a haircut. These are companies either extremely over valued, or simply companies like $RIMM that are getting pushed out of their market share. Here are two charts of $RIMM, first the daily where you can note the downtrend and extremely bearish volume. The second is a long out weekly chart of $RIMM as the company’s stock decays towards a massive support of 35.30(ish). Earnings are fast approaching on June 16th, the earnings that were significantly downgraded in late April. I expect them still to disappoint, but I will not trade the earnings. I’m looking for more decay as we head into earnings, where $RIMM will either be placing an iron stake in the ground or the final nail in the coffin. I love my BlackBerry, but they have “Nortel-itis”. A symptom I would best describe as a Canadian company that has a few great patents (security, data compression, arguably their mobile browser), but is getting muscled out by their larger American counterparts who have a strong marketplace of followers. That hurts a lot as a Canadian and a BlackBerry owner. Either way, $RIMM is my short right now, has a high beta too.

I added a small $TNA call position (a derivative of a derivative of a deriviative….yikes) as literally a hedge and final salute to the Bernanke. I’ve got a relatively tight stop on the call, and will dump it immediately any day we gap up in the market. I expected us to catch a bounce today, but the S&P looks very hurt right now. However, if anything is going to catapult us higher, it will be the Russell 2000.

Heading into the summer:

I’m still extremely bullish on Gold. Gold typically performs very well in June and July, and I will be tempted to buy some dips or “homo-hammers” (TJWP’s post: https://tradingeh.wordpress.com/2011/04/05/pms-to-shorts-die/). This is all while knowing the inflation trade may sputter in the absence and braking of POMO. I still think Gold is strong haven for money, while I am extremely bearish on Silver. There is no sense in being risky and betting against the market at this point – I suggest defensive plays and large cash positions.

I’ll try to post more, however I’ve been predominantly sitting in cash and golfing working.

Disclosure: Short $RIMM, Long $TNA (Bernanke Hedge)


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