They Must Be Masochists

After today’s ramp into the close I’ve come to a conclusion.  The traders who keep shorting the bearish setups, either they are complete masochists, or they are insane.  The definition of insanity is doing the same thing over and over again expecting a different result.  So either you enjoy losing money, or you should probably get checked out by a shrink.

This rally has been about one thing above all else, buy the dips, and sell the rips.  We are zig zagging higher.  Buyers of breakouts haven’t had a great time, one reason why I’ve seen higher turnover in my portfolio than I would like.  We break out to new highs, and then sell off half of the previous leg, then repeat.  There have been some real pretty setups on the short side along the way which have more often than not ended in bears getting their balls chopped off.  I’ve been lucky to have had a little success on the short side along the way just to feel like I wasn’t over loaded to one side of my book, but it has come at the price of a few lost trades for sure.

Bottom line, until the market as a whole starts breaking significant trend support levels, stop trying to short weak sectors.  I was almost guilty of an infraction this morning but smacked myself in the head and thought better of loosing my manhood.

I still believe we consolidate here for a few more days.  Gold is going to bring us the next leg higher as materials and energy kick into high gear, I see M&A coming in both sectors.  Gold is just about done consolidating its recent gains, along with silver.  Stick with coal, oil services, and the gold miners.  Also look to China as copper is breaking out strong here, the two are highly correlated.

Housing and financials surged this afternoon as reports of an extension of the home buyer credit to all buyers, not just first time, made the rounds.  The regional bank ETF $KRE and the housing ETF $XHB had been on my hit list to short if the market really started to free fall, it must have been on everyone else’s as well.  Shorts were squeezed to death as they ran for cover against the all mighty White House.  Look, I am more bearish on housing than just about anyone out there.  I believe there is just too much housing in this country and not enough people or money to own it.  I’ve been screaming for a while that there are two solutions to this housing mess.

One, extended the tax credit to any buyer who owns any number of houses.  Give investors an incentive to take on risk, hey, they did it for the banks!  The white house has been too preoccupied with trying to look as if they are not helping the rich to realize that helping the rich eat up the excess housing inventory is the answer.  The second, give automatic citizenship to any immigrant that buys a house.  Our current immigration policy is to allow Guantanamo detainees who are found innocent or released to stay in the U.S. while we tell bankers and tech workers from overseas to go home because we need to keep those jobs for Americans.  I will write a longer post on immigration reform one of these days, but for now, let’s just say that immigration reform may be the solution to many of our problems, including housing.

I am fundamentally bearish as hell on housing and bank stocks, but you can’t argue with the charts.  Capital One $COF broke out after hours post earnings.  I fucking hate this company, I believe they are the worst of the worst when it comes to their credit card book and ridiculously bad loans they’ve made, but the chart says otherwise, and I refuse to fight the trend.

Amazon $AMZN blew out earnings which was no surprise.  I was shaken out of my long position yesterday as $AMZN technically broke down through a support level I had been watching.  It is easy to say in retrospect that I should have held, but there have been many a time when I’ve seen stocks act like that pre earnings and get demolished, leaving me thankful for trading the system.  Amazon is cannibalizing the retail industry, I have no doubt about that.  The malls are empty, people are shopping online, and Amazon has the Kindle.  The Kindle may not be perfect, but Amazon has the first mover advantage in this space, similar to Apple with the iPod.  There were e-readers before the Kindle, same as there were mp3 players before the iPod, but both were the first of their kind to have mass appeal.  Bottom line, Amazon is the retail winner, and now they have a product everyone wants.

Rangers vs. Devils tonight, I’ll be flipping back and fourth to watch the Yankees win the pennant during commercials.  Great time to be a NY sports fan (minus the Knicks who we have officially disowned).

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