Go Ship Something: Postmarket Update 9/14/09

I’m scared, scared of two things, a melt up and the fact that so many charts look so bullish right now.  Back in July when we were putting in the right shoulder to what looked like a textbook head and shoulders top, a lot of stuff looked really bearish.  Honestly, I was caught short and paid the price.  The bulls turned a failed move into a fast move.  When I look through my charts now, I’ve got to do the cross eyed stare thing that makes those 3D pictures pop out at you to see a good short candidate.  Why does this make me scared?  Because when everything looks bullish it’s hard to pick the real players from the pretenders.  My strategy counts on stocks that are able to trend for weeks at a time, and the real winners go for months on end.  Yes, on a short term scale we are overbought, if you are buying up here and have a two or three day time horizon, you are playing wrong.  Let the market get back below the 20 day moving average at least, but for god sakes, don’t short this market.  I am fearful of a melt up, too many things are just through breakout levels, and if we get a nice 2% gap one morning we could run for a week straight up in continuation.  My near term target is 110 on the SPY, that would fill the gap between 10/03/08 and 10/06/08.

I bought the breakout in Dryships today.  Yes you read that correctly, I bough DRYS.  Look, this is the same trade as GNA, if we break out big time the most levered beaten down stocks are going to fly like the wind.  The risk reward here is just too good, and the chart pattern looks perfect.  I think the first stop is 8.50 followed by 11.50.  After that the 200 day exponential moving average comes into play.

While we are talking about the shippers, take a look at this photo from outside the Singapore harbor.

This isn’t the first time I have brought this up, I’ve been harping on it since January.  We are not going to see a real economic recovery until these ships leave and have goods to carry around the world.  Global trade is still at a standstill, and this is only a small fraction of the vast fleet of ships anchored and doing nothing.  Notice as well, that they aren’t just dry bulkers which carry finished goods, there are a ton of oil tankers sitting in the ocean full of crude.  The “supply draw down” or “supply build” that you hear about ever Wednesday at 10:30 doesn’t represent the millions of barrels of crude floating on the ocean.  What does this all mean in terms of trading, very little.  The short term (3 months to a year) fundamentals for crude are bearish, but that doesn’t mean that the momentum players can’t move us up through 75 and on towards 100.  I am a long term peak oil believer, and the amount of energy that China, Brazil, and India will need to fuel their economies as they take the economic torch from the developed world is going to be amazing.  Five to ten years out I can see crude at 200$ or above easily, but right now, no matter how much the equity market rallies, it doesn’t mean global growth is back, and the world economy can’t support 200$ oil, I’m not sure it can support 100$ oil.

You can find a great story on these ships here.  Also, an interesting web site that tracks these ships around the world, here.

The strange action that we saw in US treasuries last week abated today as the market smacked the short sellers in the teeth once again.  I’m not sure what’s going on there, and there are smarter people than me who probably don’t either (@aiki41).

I continue to hope that I get another shot at SLV and GDX, I’m not chasing.

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