What a difference a day makes. This looks to us like the end of the flush, so we lifted our hedges.
Don’t get too comfortable though. We think there re a lot of smart traders short, though squeezed, and they are desperately looking for reinforcements to drive the market down. Too bad they can’t analyze trends.
It is really quite amazing. We have had formidable traders in our seminars — traders who have made considerable profits in the markets. Yet their understanding of trends is non-existent. They just know how to trade, but not how to trend.
As is obvious the market is now almost exclusively news driven, but since (it seems to us) all the bad news is known or is derivable (derivative news) it is difficult for contrarians to gather momentum for a bear wave. Don’t quote us on this because given the depths of human greed and stupidity what we don’t know might come back to bite us. And the market will tell us when the trend changes. The traders who profit from volatility will seize every excuse to whip the market around. If your nerves will stand these volatile days and the equity volatility it’s best just to stand back and let them have at each other. And, at the same time be certain that you have strong stops placed beneath Basing Points on your positions.
As all our readers know we think this upwave is as fragile as a china cup economically, and we know very astute analysts who have not joined it because of its questionable technical characteristics. The market at this point appears to have discounted the millions of homes yet to flood the foreclosure market, the gazillions of questionable consumer credit loans, the frightening unemployment rates. How foolish. Of course the Fed can puncture this balloon is a second with a .25% rate rise.
But one thing we never argue with is price.