Coming Off Overbought Levels

The market is pulling back off very overbought levels today as expected.  The bulls need to hold the line above SPY 107 for the next week or so to get me interested on the long side.  If….if…..if that happens and we see a high volume move to the upside, I will add heavily to the long side.

Take a look back at the falling wedge the market put in after its initial push up off the February lows.  We could see a repeat of this pattern, a low volume consolidation drifting lower.  I would see this as very constructive after the move we’ve made off the bottom.

On the short side here, if you have conviction in another leg down, coal names look terrible, I would focus there.  The US Dollar is very oversold and due for a bounce, gold is breaking down and copper is rolling over, play materials to the short side.

I continue to stay extremely small in this market on both sides.  I did have some grand illusions of getting heavily short earlier in the week but decided against it, probably for the better, I’m just not an excellent short seller, my money is made on the upside.

Bank earnings were not impressive, especially given the so called “recovery”.  Look, the banks made a ton of money last year on the government engineered reflation trade.  They bought assets with free money and were promised that the Fed would flood the market with liquidity.  Now that asset prices have pulled back, it’s not surprising to see their earnings power fizzle out.  Banks still are not lending, the typical way they make money, especially with the government giving it to them for free.  This tells me that banks still see the overall environment as not worthy of investment, in businesses or people.  I agree.  We come back to the saying, if the government is trying to get you to do something, you probably shouldn’t be doing it, because the market is telling you otherwise.

The semiconductor industry is on fire.  Yes, this is a very cyclical business, and it’s entirely possible we are reaching the peak of that cycle.  But, I believe we are seeing a secular move in wireless, mobile, and consumer electronics.  I will continue to lean bullish long term on tech given my view here.

In conclusion, don’t do stupid shit.

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see the Disclaimer page for a full disclaimer.


blog comments powered by Disqus