Thursday, July 17, 2008

Reprieve For Beleaguered Bulls

JP Morgan beat the street estimates today, to which I say, if you massage the numbers low enough you will beat them. This is the lot that Wall St. and equity traders are now relegated to. They will never admit it for to do so would interfere with client commission flow. That being said we must respect the tape, and for the time being, the shorts are covering and the bulls will buy any news not negative for the financials, this too shall pass.

I have posted 3 charts, the the Spiders (SPY), the Diamonds (DIA), and the Quad Q's (QQQQ). I want to bring your attention to the volume of the last 2 days. Readers know I value price as paramount, but again as Art Cashin would say, volume equals validity. Yesterdays RALLY day was on lighter volume than the previous days decline. This is true across all 3 indices. I am not poo pooing the rally yesterday, it was long overdue. I am just bringing this to your attention before you think we are on the verge of the 2nd coming, which would be understandable listening to breathless Bob Pisani and Co. on pom pom TV.

The Merrill Lynch chart (above) is fairly self explanatory. We got the official news late yesterday that they are selling their stake in Bloomberg, due to the fact that the rating agencies threatened them with a credit downgrade if they sold their stake in Blackstone (BLK). Considering the market experience this firm has, the decision to sell Bloomberg, which is far and away, the best asset they own, is lunacy of the highest order. Great traders and organizations worth their salt sell their worst assets or divisions and keep the best, under the adage sell your losers and keep your winners.

I realise that when you are under the gun and have to raise cash you must get it done. This transaction tells me all I need to know about the value of all those level 2 and 3 assets? Merrill has on their books. If they were worth anything they would have sold those. My guess is there is NO BID on many of these assets, so they are selling, as Art Cashin would say, what they can sell. I wish them well. Longs would be well served to use this rally to get out. Unfortunately, many will see the rally yesterday and today and vindication of holding their losers, convincing themselves that they were smart to hang on. Truly fascinating the psychology of the capital markets.

I want readers to pay respect to yesterdays rally but view it in context of where we are, a bear market. Whenever you want to panic and cover your shorts, or worse get long, I would counsel you step back, punch up a 1 or 2 year chart, and take a longer term view of whatever it is you are looking at.

For as the greatest speculator of all time Jesse Livermore said in his speculative classic Reminiscences of a Stock Operator, "it was never my thinking that made me the big money, it was my sitting!"

Good speculating to you all and always remember that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 3 units Ultrashort Dow DXD@ $50.12 stops $62.22/60.49/58.62
Long 1 unit Ultrashort Financials SKF @ $103.90 stop $161.72
Long 3 units Currencyshares Swiss Franc ticker FXF @ $97.35 stop at $93.82
Long 1 units Ultrashort ReEstate ticker SRS @ $88.95 stop $96.84
Long 1 unit Ultrashort QQQ ticker QID @ $37.05 stop at $42.87
Long 1 unit Ultrashort S&P ticker SDS @ $57.20 stop $66.89
Long 2 units Hecla Mining ticker HL @ $8.50 stop at $7.74
Long 2 units Kinross Gold ticker KGC @ $18.93 stop at $21.24
Long 2 units Ultrashort 20yr Treasury ticker TBT @ $67.85 stop at $65.69
Short 1 unit Daimler AG ticker DAI @ $86.20 stop at $62.56
Short 2 units Brinker Int'al ticker EAT @ $20.07 stop at $19.64
Short 2 units Darden ticker DRI @ $36.35 stop at $33.16
Short 1 unit Lehman ticker LEH @ $43.70 stop at $17.64
Short 2 units Deutsche Bank ticker DB @ $117.03 stops at $93.37/88.34
Short 1 unit of Visa ticker V @ $86.25 stop at $76.32
Short 1 unit HSBC ticker HBC @ $83.23 stop at $80.53
Short 2 units of Netflix ticker NFLX @ $30.35 stop at $29.43


NYSMTG said...


NYSMTG said...


Harleydog said...


my opinion often isn't worth much, but thx for reading and your kind words.


NYSMTG said...