Saturday 15 December 2012

Interesting Week Ahead.

Here we are, at the edge of the cliff and yet we are only 60 points down in SPX from the high of the year and that was almost 90 days ago. It has been incredibly choppy during all these days. So if we have stayed on the sideline with respect to equities for the last 90 days, have we really missed out on any great opportunity, particularly, if we are not day traders?  Bad news has piled up but equities refused to correct in any meaningful manner. One reason being the liquidity that is being pumped by the central bankers around the world. We know that it is not going to end well, one way or other, but we do not know when exactly.  The best thing to do in such situation is to keep the time horizon small, be ready to run quickly on any short trade and look for opportunities everywhere, not just in equities.

Last Friday was another teasing day. I sent out a tweet in the morning highlighting the levels for shorting the market.  Almost in each case the EOD was close but did not go below that. As a result short trades were not initiated. That is the beauty of following a system, when we can override emotions. As you know, most trading mistakes are made because of emotions. As of now the short side is bit over crowded and everyone and their grandmother are dead certain that bottom is going to fall out. It may not be so.

A correction can happen in price, in time or with both. In the last 90 days we have had a correction which consisted mostly time factor, less in price but the end result is none-the-less same. Folks out there are gloomy and they hate this market with a passion. Just look at the short interest.

The short interest is at levels next only to seen in last June.

This coming week, we may see some more price choppiness but definitely not a waterfall. If I may remind you, bear markets start at the height of euphoria, not on bad news.

While cycles are still down for most of the asset classes, they are now about to flatten out in the next 7-10 trading sessions and that makes me uncomfortable going short without price confirmation. There is simply not enough time. The most notable feature of Friday was the drop in US Dollar index. Apple tested its lows. I think it has another 5% to fall and that would drag the Indices down by about 2%-2.5% and that is the max. downside I can see for now. I will be going through all the data and algos over the weekend and the weekly newsletter will highlight if there is any trade worth taking. But safety comes 1st and I am not going to be a testosterone driven rash adventure seeking aggressive bungee jumper. Been there, done that, learned my lessons.  

Not a day passes when we read some kind of gun violence and yet there is no political courage to stand up to this monster. Children pay the price and politicians shed crocodile tears. Its good television but after few days, everyone forgets about this killing to discuss the next. I feel sad for the kids who died in this senseless act of violence but more than that I am angry at the duplicity of the politicians and the authorities. How on earth a mentally unstable man could get his hands on assault weapons in the 1st place. The blood is in the hands of the politicians.

Enjoy the weekend with your loved ones and take some time to remember how blessed we are. See you all tomorrow evening with the newsletter.


  1. >>> liquidity that is being pumped by the central bankers around the world

    They don't even need to bother pumping anything (except for Ben, who has biggest market on his hands). Japan is 15% up in one month on a promise of unlimited easing.

    Meanwhile at home apple is -5% on the week (but NQ not even blinked, minus 0.25). Unbelievable. Although NQ is whopping -2% from beginning of the month, but apple did even better -14%.

    Full disclaimer - I passionately hate this market :)

    1. You are not alone in that department my friend. That's why it does not go down.:)

    2. Not going up either, despite Ben pumping 3 bln/day :)

  2. As for why the guy was able to get the guns---
    he killed the owner (his mother) of the guns and stole them. You cannot stop this type of killing by the way of gun control legislation. What he committed was an act of crime that led to another act of crime. A criminal can always get a gun legal or illegally.

    1. So the solution to gun violence is to arm everyone including the children. More guns and assault weapons will solve this problem. Wonderful!
      How many more kids have to die before you guys get the logic right?

    2. the soultion is to realize you can't PREVENT every situation, but you CAN minimize damage by empowerment. Had that principal had access to and training to use a weapon, she would be a hero we could hear from her own story, not told by those who were there

    3. The solution is to make access to gun highly difficult. Please do a research on gun related death in other countries in western world like Canada, UK, Switzerland or Japan before spawning silly theories.
      The gun lobby has spread these theories for over 100 years now and we know them all by heart.
      By the way the share price of SWHC has tripled in one year. from below $ 3 to over $9. So yes, we do need more guns in America for the future of our 401K and safety of kids!

    4. The White House dot gov website has a tab for "citizen petitions".

      Someone writes a petition and if 25000 people sign on the White House staff has to respond. That's how I understand it works anyhow.

      I looked the day of the school shooting expecting to find something demanding tightened gun regs, a return to something like we once had before the NRA began to twist political arms and loosen things up. There were a couple petitions asking for more gun regs like I was expecting but there was also one demanding teachers be required to carry sidearms in class. I didn't know whether to laugh or cry when I read that idiocy.

      Newtown, CT is an affluent exurban community with something like a median household income of $100k/year. I also wondered what the shooter's mother needed with the Bushmaster (the same weapon used in other mass shootings, by the way) and other military weaponry. Keeping that kind of firearms in town is asking for trouble.

      Mr. Market is burning off his overboughtness while prices only go sideways. He's about to head north again, IMHO.

  3. Good analysis BB.

    I did my weekly re-read of your Regina Brett post in Art of a Better Life. #15 was spot on for Friday's tragedy.
    15. Everything can change in the blink of an eye.

    1. Thanks O_L.
      Something is seriously wrong with American society if folks still insist on more guns.
      Why a school teacher (mother of the shooter) would have an assault weapon and two other guns in her house?

  4. Thank you BB for sharing your righteous indignation
    It is an horrible and unbearable tragedy
    it's stupid and dangerous to think that a weapon can solve anything in a fearful and insecure society
    guns are equal death not protection

  5. Trust me... Criminals do not care about gun laws...
    They commit their crimes in locations where guns are prohibited...public malls/public schools/public theaters...It is so naive to just focus on gun laws when any criminal or unstable person can steal or purchase a gun on the black market....Why is their no outrage directed at the entertainment/liberal media that produces all the crap our youth are exposed to 24/7...?...Where is the outrage at the anti-depressant drugs being handed out to our youth by the medical profession...?....In Britain the criminal just breaks into your home assaults and robs you ...They are not afraid of you there because you are defenseless !...Here in rural Texas people appreciate and understand the concept of self defense and the 2nd amendment right to possess a gun to defend ourselves...!

  6. The school had an illusion of safety by installing the door lock - buzzer, why didn't they brick-up the glass and put in a video camera? They only kept the law abiding out.

  7. Why is it every time someone is killed with a gun, people get crazy about gun laws. What about vehicular homicide, knives, poison, or sheer stupidity? you going to outlaw everything that kills people. Remember, guns don't kill people. People kill people. There are already many powerful gun laws presently in effect, which should be enforced. Look at the situation: There are 300 million guns registerd to private owners in the US alone, and every once in a while some crazy person gets a hold of one and kills people. It's a shame, but you can't revoke the rights of every single law abiding gun owner because of the actions of a single lunatic or criminal. That's silly, reactionary and protected by the US constitution.

    1. Yes,I am sure I have heard / read that line somewhere before.
      All I ask, how many more innocent kids need to die before they make it difficult to make a criminal or mentally unstable person get a gun.
      Do you really need an assault weapon to protect your house from a burglar?
      I am not saying don't give guns to honest folks. I am saying make if difficult for criminals and unstable persons to get guns. At least ban semi-automatic guns.
      In a democracy, majority wins. Hold a vote / referendum how USA wants to deal with guns. And you are right, they should at least enforce the existing laws.

  8. It is AGAINST the LAW for any person suffering from mental illness or have any record of being treated for mental illness
    to have access or be in the possession of a firearm...Why doesnt our U.S. Govt (yes you Mr. Holder) even try to enforce the LAWS that are presently on the books instead of trying to pass new laws ?...I believe concealed carry (state by state) is the only near term solution giving a school faculty member (i.e. like a coach with military and extensive gun training)the right to carry a concealed gun on school property.