Thursday, November 20, 2008

A Few Thoughts

I thought it worth the risk to take a punt shorting the Dow here on the new lows being made across the major indices. As mentioned in my prior post we not only violated those lows we closed there yesterday which is truly ominous indeed. I have decided to just short the actual Dow tracking stock the Diamonds and not use the Ultrashort proshares ticker DXD as has been my usual M.O. Call me afraid, call me gun shy or the like, I just feel more comfortable doing it this way given current conditions.

The bounces in the markets of late have been anemic, nothing more than violent short covering via panicked shorts who have it ingrained to take quick profits, which truly shows how sick and weak this market. More importantly you must remember that as oversold as we are in the broader indices, this is the type of environment, extreme oversold levels, where crashes occur from. I do not say this lightly.

Please beware of this as I am absolutely sick of hearing of this Hogan bottom. That the worst is over, the lows are in courtesy of the shameless pom pom network. No offence to Art Hogan, whom I know nothing about other than he took a stab at a call on a low. This is absolutely useless drivel as the hosts and majority of guests on CNBC try to fill air time as they have nothing of substance to contribute to a legitimate market discussion which is in SERIOUS trouble.

You think they do? Really? Then why, might I ask, has no one come on to tell you 3 of 4 major indices have broken and closed below their prior lows? That we are extremely oversold, and with feeble bounces a crash could be a legitimate possibility?

Of course not. Too busy telling us we are off the lows of the day and rustling up the next shill to tell us that a new and improved bottom in the market is upon us.

Bob Pisani telling us how the traders he talks to cannot believe GE is at $14. I have no idea who these traders are but they might want to prepare for GE trading at $8.

Citi trading at irrational levels according to Charlie Gasparino? Well, C is insolvent and the market is finally getting it's arms around that fact. CNBC will when the stock is trading under $2, just as they figured out AIG, FNM, GM et al. After the stock had imploded.

Pathetic, truly pathetic.

The credit markets are flashing extremely dangerous signals which market participants ignore at their own peril. I keep hearing the shills on TV say the markets are cheap, the selling is irrational. That this is all a capitulation panic induced selling. I would counter that the decline has been quite orderly, bids have been withdrawn, the smart money is selling rallies and if they aren't selling, they sure as heck aren't buying.

Further, I would counter that the general public has not even come close to panicking yet. Their advisers have been counselling them to sit tight, to hang on that equities always go up. When that happens and the public does throw in the towel we will see 4-5000 on the Dow. I hope I am wrong but I fear I am right.

Good speculating to you all and never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Short 1 unit of Diamonds, ticker DIA @ $80.30 stop $83.71
Short 1 unit Apple ticker AAPL @ $110.90 stop @ $100.53
Short 1 unit ticker CRM @ $56.05 stop @ $32.56

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