What’s that sound? It sounds like, like, like a bat hitting a ball. (Not a Giant bat.) Could it be…Spring? One day an Alaskan storm was raining barrels of ice cold cats and dogs on San Francisco and the next the bats were out and it was 80 degrees. And speaking of cats and dogs…there is no reason on earth not to and some positive incentive to invest in the Russell 2000, shown here going to new highs. We look at strength here as favorable to the bull market in general. So who’s going to rain on our parade?
Congress. If the crazies shut down the government, what’s it going to do to portfolios? Last time in ’94 the market said good riddance. But due to the law of changing cycles you can’t count on that again. If you thought violence were in order you could always buy the VXX.
This would appear to be a violation of our rule to not buy issues in downtrends, but the VXX is a weird beast and is a volatility and violence bet. And the downside is pretty limited at this point.
Then, of course, you could always short the bonds. If the government defaults that could be a very good bet. TLT.
We were short and closed a profitable trade when the downtrend line was broken. A short term uptrend is going on right now but bonds will probably suffer over the long run. And so will Bonds.
Meantime Italy who we have been mocking is now learning German and enjoying schadenfreude at US governmental dysfunction. Instead of putting Berlusconi in jail they are going to send him to the US where he will buy NPR and run for the presidency on the Tea Party ticket. And probably be elected.