Monday, March 16, 2009

The Bull is Tired

Imagine, if you will, a 4000 lb four legged animal that ran at top speed for 4.5 miles. A sprint for 4.5 miles. Imagine how tired that animal would be. That animal would need to stop and rest to catch its breath, otherwise, it would die. That is what the bull has done here. It sprinted somewhat downhill for 4.5 straight days before running out of steam. The bull that brought the VIX down from 50 to 41.5 has nothing left in him. He needs a rest.

The VIX was impressive in the past 2 trading days never going into the red for two trading periods were the market was up solidly. It showed that fear was entering the market again. Even though there were buyers coming in, there were a lot of holders taking profits and getting out, knowing it can't last, no matter how much suspect good news was being thrown at them. The savvy investor has seen this movie before and knows the outcome. The unsuspecting investor wants to ride the trend and may have got into the game late. They will be the last to leave and will take the losses.

The VIX finished up over a point after bouncing off the lower trend line on Friday and avoided the 200dma. It is now approaching the 20dma once again.

BUT DON'T GET CARRIED AWAY!!!! If the VIX does not get to the 20dma tomorrow, I have to suspect that there is a chance the pullback will not be very large. Perhaps an S&P in the 730-735 may be all we get. But if the VIX can reach, 45.5 or higher tomorrow, I suspect we are looking to retrace back to 700 and could possibly signify a new low is coming soon.

I am still avoiding financials as a whole (no faz, fas, skf, uyg). I am pretty heavy on GS puts and I think if financials pull back, GS will lead the way with a target of 82. I think tech for whatever reason, has gotten ahead of itself. Big names like RIMM, AAPL, GOOG are headed into earning season with some high expectations due to recent hype. I think all 3 will disappoint. So tech seems to be a good short area to look at. Not all tech, but certainly GOOG and RIMM. I decided to jump into April and June puts on GOOG with strike prices as low as 200. RIMM I am also very bearish on. You can't have aapl and palm announcing new products in an already overcrowded arena in a bad economy without having some effect on bottom line.

OK, back to VIX. I love the action we are seeing, but it is not complete. If VIX does not advance from here without conviction, we are not heading back very far. The bears have to show strength and they will do so in the form of a higher VIX early tomorrow. If the market goes down and VIX stays flat, it may be time to play swings again. VIX passing 45.5 will be a trigger.

I know I am probably too in love with SRS, but damn, I can not see any positives coming out of real estate in the next 6-12 months. I don't care if they throw m2m out the window, commercial RE is about to hit rock bottom. The next strip mall you drive by and see all the empty spaces, you may want to consider contacting the owning bank and making a cash offer. Cash out of your wallet, that is. that may be all it will take to get it.


  1. I am more conservative than you. Maybe GS in the high-mid 80s. And $INX in the mid 740-770 channel.

    After opex is over - that will be a different story.

  2. yea, this guy is too bearish



  4. i ageee, if goog misses earnings, its gonna look just like RIMM did back in sept/oct 2008, a frigging "free fall"

    those cult stocks some people think are invicible, WHEN they crack....they reallly CRACK.

    if goog misses the next day it will be at 52wk lows, period.

  5. SRS: As an expert in commercial real estate let me simply say two things:

    a) Strip malls are only a small component of commercial real estate.

    b) REIT stock prices have taken massive hits. Most do not deserve it. Some do. SRS speculating has exacerbated the moves. Without this leveraged ETF Gambling (gambling is all that it is) they would not be hit this hard.

    Don't get so carried away w/ SRS is all I am suggesting. It will make for fun swing trading if you are on the right side of the trade.


  6. straight SPG/VNO puts works even better than srs (imo)

  7. wow. what an awful day. brian, what is your prognosis? it looks like we're down at the 200 day MA. did we cross it?

  8. Will vix 40 hold? I am seeing major dollar weakness and also seeing potential breakouts in may grains futures (corn, wheat, soybeans).

  9. This is an interesting point in the VIX. Does it continue its move under the 200 dma? Or does it recycle back over its 20 dma which is more historical for it. I fell the later is more likely to happen only because it is the nature of the VIX and the market is being propped by very suspect news and media running with that suspect news. No data is telling us the economy is betting better. But Mr. Mustard Seed is yelling at the camera telling you we are in a bull market, while at the same time, telling you that the Obama administration are incompetant. Go figure.