The Credit Time Machine

I can feel the tide turning, I don’t like it because it forces me to shift gears and puts my strategy in no man’s land until a new trend emerges.  But to ignore the facts would be criminal to my P&L, which has taken a hit as this trend has ended.  I still see opportunity everywhere, not getting whipped around during this critical period is foremost on my mind though.

Here are a few things I’m looking at…

Once again, the high grade corporate / high yield / treasury correlation chart did its thing.  We saw a high grade corporate bonds and treasuries get hit at the close on Friday while high yield debt ticked up hard, with equities closing on the lows.  And like clockwork, we saw equities open strong this morning through the first hour with $JNK popping as well and $LQD and $TLT getting hit.  Watch this correlation into the close again today as it has worked the past week.

Update 5:30 PM – I did not see anything at the close today which would lead me to believe we open either direction tomorrow, time machine took a day off while the Goldman Sachs battle bots toyed with the market.

We now have a sell signal on the $SPY as I talked about late last week.  I will no longer be looking to swing long positions, they will be short term trades as we have an absence of trend.

I talked a while back about what would happen if we saw gold keep climbing and the equity market start to fade.  My major question was, what would happen to the gold miners $GDX?  Were we going to see the two move together, or have $GLD act as a safety play and $GDX get dumped as a “risk asset” with the rest of equities.  It seems that we are begging to get some answers.  Gold is acting in an extremely bullish fashion while the gold miners are sorely lagging.

Gold did exactly what it should have, tested the breakout level at 1027 and bounced hard even with the $USDX moving up.  $GDX is moving back down to its trend line support.  You can buy it down here with a stop below that red line.

My last little bit today is a question about the mobile internet theme, or more accurately, wave we’ve seen since the March bottom.  Everything mobile internet has been on fire until about two weeks ago.  Investors are booking gains quickly and many of these stocks are falling apart.  I will be looking for them to find support at significant retracement levels.  If you’re an investor, this will be your chance if you believe in this theme.  Personally, I believe in some of it, specific names, and believe that others (cough cough $PALM) are complete pretenders.

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