Wednesday, June 3, 2009

Dead Cats and Such

If you are thinking this is the beginning of a big decline, guess again. This is not it. Today's action was clearly just a normal pull back (reverse dead cat bounce) to an otherwise upward market. The VIX continues to bounce off of the continuing declining 20 dma just as it did today. The VIX at least touched it but bounced right off telling us the market is still not ready for a significant correction.

The SPX also is technically not showing signs it is totally exhausted. So you can be locked and loaded for bear here. You have to let the market continue its strength until the technicals clearly tell us a sell off is here
I hope you all were able to scalp off 10% on SKF or SRS today from Mondays prices where I mentioned a 10% gain was there for you. I took mine as soon as the VIX bounced off the 20dma and knew it was time to take profits.

UNG slide today which presented an interesting opportunity on July and Oct calls. I like the July 15's and the Oct 20's. I think UNG is going to be stellar this summer lets see.


  1. Two weeks ago everyone was looking for a pullback, now no one thinks that we are going to have one - other than "headfakes". Me thinks it must be time for one as all the shorts have given up.

  2. I think you may be misreading. First the shorts haven't give up. The bulls are winning based on mis-information. The market gives and takes and right now the market wants to take. We all know the economy is not getting better as the data is proving everyday. The question is, when does the market catch up to the bad data? The media continues to spin it as green shoots and "less bad" data. But the truth is, housing is not getting better at all, credit lines are not getting better and unemployment is not topping off as expected. The gov't expected no more than 10.3% unemployment but we are on pace to see 11.5% unemployment. That means the stress tests were invalid and the windfall of this will lead to bank failures, the collapse of commercial real estate and more and more retail failures. Not to be a gloom and doomer, but this is reality.

    You just have to time it right and let the pumpers have their day. Technicals count and you can't ignore them.

  3. I agree, but all shorts I follow have given up their positions and are waiting to re-enter. I think the move down has started (although my crystal ball can be cloudy at times). My technicals say that we topped at $95 on SPY, and that today we are just filling a gap down from yesterday. You have an easy short trade with a close stop at $95ish and a target of $88 within two weeks. Nice MACD and Money Flow divergence. Wait for entry until MFI turns south below 70 on a one hour chart to confirm entry. Nice job on your blog.

  4. I do like that so many bulls are pounding the table and complacency amoung analysts is that the market is going to go higher and higher. The bull side is getting very crowded. Or the non-bear side is getting very sparse.

    While the divergence looks very nice, not sure we are at the point of a clear entry on the short side. I still want to see the VIX go above the 20 dma and the SPX 20 and 50 dma's start to converge.