Monday 7 May 2012

Bouncing Around.

Considering how bad last night’s future was, thank our lucky stars that the world did not end today. I suppose we will have to wait some more time for the apocalypses.

Technically speaking, markets were bit oversold on last Friday and since this measured drama is being choreographed by the BOYZ for more free money, we will see bounce for couple of days. But the trend is down. SPX is well below both the 13 DMA and 50 DMA and after a 2nd attempt 13 DMA is crossing below 50DMA now. The initial downside target is between SPX 1330-1340. If we breach 1330, next target is 1275. But it is not going to be one straight line. There is every chance that when we reach 1330-40 level, we will see a good bounce before another downer.   I still think we are playing out the script of 2011 with some minor vibrations.

The pattern of S&P 400 (ETF: RFG) seems very similar which I have highlighted here. Commercials are net short in S&P futures whereas retail is net long. It happens like clockwork!

Commodities were weak as expected. Crude continued its downward spiral but it is also due for a bounce for few days. The commercials have built up a good sized short position in CAD$ which is a proxy for crude.

I think we will see Crude in the range of $ 70-$75 in the next few months.

Gold and Silver are not going anywhere and QE3 crowd who wants to ride gold to $ 10,000 / oz seems little disappointed. Still now, gold and US$ is moving in opposite direction but I think a time will come soon, ( By soon I still mean about a year) when they will move together in same direction. Right now a huge debate is going on between the gold bugs and the comments made by Buffet’s sidekick.

Apart from the well informed and intelligent people in the blogosphere, investors by and large shrugged off Europe. It seems nobody in US of A really care about the happenings in Europe. Sometimes ignorance is really bliss. US $ lost some of its mojo during the day as a result of non-caring attitude of the US investors but have now formed a base around 79.60. It will be interesting to see where it goes from here.

We added shot position on Copper and Crude today in our model portfolio and now we wait for the summer correction to play through. However, be ready to dump the short position in a short notice though.

Thank you for reading


  1. BB, what does your model predict for GLD - time to buy or wait longer? Thanks!

  2. BB I came across your blog from SOH. Thanks for all the analysis you provide. I didnt get a chance to add some stocks from your model portfolio on May 1st, so is it too late to add some shorts at this levels. ES is hanging around 1350 as i type this post.

    1. My initial target is 1330 in SPX so we do not have much room to the downside. On the other hand most of the picks are going to run for a while except FAZ and SRTY. I think we would see a bounce when we reach oversold situation and then we can add some of these positions again.
      But hey, we will always get opportunities on both sides of the market. This is not going to be the end. Cash is a position and 1st principle is not to risk capital.