Friday, April 24, 2009

Double Top???

The market continues to stay resilient based on hope and based on the belief that the economic data is showing a possible bottom. Maybe it is. Who am I to say? Well, I am not to say but there are plenty economists out there who are saying there is still a lot of pain ahead of us and it isn't hard for me to read the data and see that things are not getting better.

Take the housing number. If that number came out 6 months ago, the market would crash. The number is really horrific given that the average home price fell yet again and interest rates are at all time lows. Given the interest rates and the avg house price, housing should double! Yet, it only barely beats estimates. And the media jumps on it as great news. The housing dilemma is over. Everything is fine.

Take the unemployment number. 640K more. Yet the media pundants praise it as a sign of the bottom. 640K new workers unemployed is good???? I am so sick and tired of hearing this.

Look, I am not a bear just to be a bear. I am a bear because I see the reality. And I post this blog mostly for my own sake, but also for yours. If you want to go long, go ahead. If you want to put all of your 401K money back into large cap growth companies, go for it. But don't come crying to me in 3 months when we have tested the bottom again and you lost.

Longs should consider taking profits or protecting their profits via hedges. As a short, if I had not played hedge positions at every corner, I would be crushed right now. Instead, I have helped limit my paper losses, taken profits on some big hits I made and I am quite comfortable in my current short positions.

Now, if the market goes to 1000, well then I will be hurting. Lets see what happens.

AMX is going to correct. As are some of the banks (not all). The VIX barely moved today and is actually getting closer to the 20 dma, rather than farther away. But it still hasn't crossed it so until it does so and we get a 2-3 day decline in the market, there is no evidence the bear market rally is over. TA says it should be. Today represents a double top situation. If the market can top 880, we are headed higher. If it can not penetrate 875, we are headed lower.

Lets see and please, learn to take profits when you can and make sure you have strategic hedge positions whether you are long or short.


  1. We've all seen this game of musical chairs before, where awful news is pumped on CNBS as rah-rah news. It's absolutely pathetic how as of late, one needs to be dumb as a rock in order to be long this market and be able to sleep at night...Sheesh!

  2. Well said, Beamer. I am not total bear, but the reality is we have been running up the market over 30% by very pathetic numbers in the housing,unemployment and earning report. People shall take advantage of this opportunity to seize their profit and adjust their holding rather than adding more shares by higher price. As much as living in denial is comforting, but it is not a solution. We all like to see the market to recover, but we need to know our math and do our studies to realize the gains of over 30% of the market is unsustainable. History can only repeat itself if people don't learn their lesson by ignoring the P/E, EPS and the ongoing climbing numbers in unemployment, home prices and corporate losses. Not to forget the reason of banks are beating the expectation due to the M2M and the extreme low bar estimate by the analysts. They won't be able to use M2M to help them with the number like they did this quarter. They'll have to really make money and show profit. With increasing people losing jobs right and left, where the profit going to be coming from? We are due for a pull back. Whoever not wise enough to take some money off the table will be due a big surprise when SPX falls back to low 800.