Toe in the Water

I mentioned last week that I believed the technicals
were favoring a
short term upside pop
. I also suggested that I was waiting for this week to make any purchases.

I am purchasing a smattering of QQQQs, SMHs, and SPYs here for a trade; I expect to hold these less than 30 days.

Caveat: understand that I scale in slowly, and have a tendency to be a touch early . . .

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  1. Michael C. commented on Mar 6


    You are buying while the market has just broken down from its tight range.

    If this turns out to be a bear trap, you will be right on.

    Hopefully, this doesn’t turn out to be the beginning of a waterfall move down.

  2. duncan Robertson commented on Mar 6

    it seems i tend to go too early

    and yes; i am long; and will hold a while

    the top is not in

    but the shorts are

    and they need to get a bear hug with a move up to squeeze them out of the game

  3. Mike commented on Mar 6

    Barry shorts gold and trades Q’s near the top.

    He’s all man ;-)

    The trading programs might give us one more rally.
    I’m done though – I’m biding my time and have puts on
    SPY, DIA & OIH.

    OIH – closing out of. Not sure how low oil will fall.

    This is too close to the end for my taste but I think
    if you’re playing options you have a good change
    to double your money if this is a bear trap.

    My gut says it’s a bear trap. The chart don’t look


  4. john commented on Mar 6

    Check the weeklies in the SPX. Using c’sticks I see a clear top. I think we’re in for a bit of a ride here. In anticipation I closed just about everything out last week and am sitting on cash.

    IMHO you might be early by a bunch.

  5. B commented on Mar 6

    Well, this will be interesting. If we get another day or so of selling, we could see a 2-3 day trader’s rally based on very short term technicals but I see nothing else supporting such a move. Odd lot short data is high and is quite accurate except at tops…… But, it is usually accompanied by other supporting data that is not aligning. And it would mean a whip saw in that other data that seldom happens.

    I guess that’s gibberish for saying I’ve got my fingers on a massive amount of data, most of which is not generally available (not to say your data isn’t bigger. lol) and this doesn’t appear to be a high odds/high return rally IMO.

  6. Bynocerus commented on Mar 6

    I’ve heard the term bear trap more today even more than I heard the term head and shoulders top a few weeks ago. My initial impression was to buy on weakness too, but it seems like everyone and their brother is looking to buy this dip. For all the discussion of the II #s of late it appears that many market participants are paying lip service to the possibility of a correction while maintaining very net long exposure.
    Give that volume has been higher on distribution days than on accumulation days over the last three months, I’m willing to sit tight a little longer.

  7. Mark commented on Mar 6

    If another 150 pts were to come off the Dow and the internals were suddenly in good shape I might go along for the ride. But given that in bear markets the winner is the one who loses least, I will stay with my gold, treasuries and everything else hedged out the wazoo, thank you.

  8. vfoster commented on Mar 6

    i think caution is in order. it is no coincidence that goog, aapl, gold, oil, real estate mkt etc were putting in tops at the same time. then last week we get melt down in TY1 driven by large funds unwinding flatteners in front of BOJ meeting this week. to me the market is displaying tighter liquidity conditions. smart money index has been diverging from DJIA for months now and i am thinking there is no large money stepping in to buy.. the upside days are program driven and short covering, not real money buying. receding liquidity will trump fundamentals… what is the thesis to drive buyers? earnings are slowing and the low interest rate multiple expansion trade not looking too hot (could actually see contraction) with the long end unwinding. god forbid the mbs convexity hedges start unwinding, that could send 10YR yields thru 6% in a hurry. convexity buying was huge reason 10YR yields fell so much, especially after treasury removed 30YR bonds..

  9. Eclectic commented on Mar 6

    Toe in; thumb up.

    We played a game as pre-teens in my neighborhood. We’d bet with each other who could hold a Lady Finger firecracker the longest, fuse burning, until just before the explosion. You hold it between thumb and forefinger….ssssssssss….., then toss it just before, just e-x-a-c-t-l-y before the pop! Get the picture?

    It didn’t hurt too badly if you screwed up, so most everyone was bold and brave. Lady Fingers don’t hurt much, even if you elect to hold it and have a peculiar wish to experience the pop.

    I usually won.

    Then we graduated to playing with the more powerful Black Cat brand. Believe me, you won’t hold that one on purpose, at least not more than once.

    I usually won that game as well, since my testosterone level was on the moon in those days.

    But, I had a cousin a few years older than me, and he had more testosterone, and he’d win every time… although he would suffer quite a few inadvertent burns and skin-peelings, cause he didn’t mind holding the Black Cat and feeling the bite.

    He was tough. He could bend an old steel beer can double with one hand. Some of you may remember the old steel cans… so you know what I mean… tough.

    Later, he tried the firecracker game with some others (I was too chicken) and they played with the very powerful M-80. It’s a little like a shotgun shell with a fuse.

    He blew all the skin and fingernails off his thumb and forefinger, and he almost lost his thumb.

    I reckon he had poor judgment.

  10. vfoster commented on Mar 6

    obviously, i meant 10YR yields could get to 5% in a hurry, not 6%.. though 6% could be a problem if you really had a big melt down…. talking about busting the housing bubble.

  11. B commented on Mar 6

    5% in a hurry and then some. I believe 6%+ in a relatively short period of time (months) is a possibility. I’m not saying probability but possibility. This is the final key to the puzzle we’ve been missing. The mbs market is going to unwind some IMO. And that is going to increase volatility well beyond what anyone expects. In addition, the market has stored up alot of energy here. The ten year bond is at the lowest volatility level since July of 1998. That was right before, you guessed it, a 50% rise in long term rates from 4%. We have some other extraneous issues that could add fuel to the fire depending on how they play out.

    While I don’t have a crystal ball, the market never seems to cooperative with the prevailing wisdom. That has been the yield curve inversion. Yet, we were missing one big piece of the pie IMO. The curve was inverting as much because long term rates were dropping. Equity market selloffs are not caused by yield curve inversions with falling ten year rates. Ever. It is when long term rates are rising that we should be cautious. We saw a few other messy ten year rate explosions because of the mbs market. A big ole snotter in 2003. And this action has coincided with every major top in my adult life time.

    If we get alot of energy out of this ten year move, I’d bet the farm, this will be the end of any rising equity market scenarios. But, it has to develop. I’m extremely confident it will as I’ve been watching this turd for months and it has done exactly as I would have expected…so far. The only question is to what extent. I’ve already posted my guestimate.

  12. muckdog commented on Mar 6

    Nothing like a little pre-options week drama to set up a nice run, Barry. Nice job. I think you’ll make money on those buys. JMHO, of course.

  13. todd commented on Mar 7

    I think you’re crazy in the face of the huge bond sell-off today!

    I don’t think the market is going to tank, but I sleep a lot better trading on the short-side this year.

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