Weekly update 11/28

Looking to increase longs in to this weakness but it is not without hedging. There are many weak equity names out there and looking at the bigger macro picture, there are industrial metals and energy that are relatively weak and continue to be good hedges (something I have stressed for some months now) against equity longs. Precious metals continue to be good longs as well.

This could be the last upmove in equities before we get a bigger correction going (both in time and space). Emerging markets are horribly weak and also some developed markets like export oriented Sweden which also has not had its housing market crash yet (but it will), compared with for example the S&P. So there are many ways to setup long/short portfolios in this environment.

In many markets it is obvious that central bank actions are boosting financials relative to industrial. This I take as a sign as the final push higher, when fundamentals (layoffs) catch up, it will hurt everyone. But it is more - both in fundamental analys and technical analysis - a projection about generally "dead" markets than something that will crash like post 2000 and 2008.

 

Weekly update

Ok, so the projection from last week was to look for a brief flushout starting Monday. It will be very important to see how the emerging markets are behaving, considering the weak technical picture shown in the earlier post. With holiday volumes here in the west, it is easy to envision a slow pain trade grind with a positive bias simply because of the negative positioning and sentiment. But there is something potentially very weak out there which deserves to be taken very seriously. I would not trade with more than 50% of normal volume until there is more clarity. Are these markets ready to really break higher? I doubt so and would rather than participate in the upside, decrease longs the coming weeks and end up fully net short by the end of the year.

Weekly update 11/21

Election squeeze, and over done sell off and now right back at 1390. A lot of technical damage was done the last weeks. If the SPX looks bad, commodities like oil and copper and some tech names are outright horrible. The only factor that is worse than these charts is sentiment. Sentiment is so bearish it only takes a minor piece of good news, like a half hearted fiscal cliff solution, to push this market to around year highs.

I am looking for a brief decline post thanksgiving to flush out some of the swing bulls and then a continued bearish sentiment driven squeeze to around new highs. This position could easily be hedged by short positions in some commodities as well as a long position in the dollar. It looks like emerging markets will lead the way to the downside after this final squeeze. Right now, let the option premium decay in to the low volatility holiday season.

Weekly update 11/6

I would recommend using an election squeeze to light up on longs. Also, those sold puts are moving towards 0. I would not stress about hedging that position, rather selling some calls on the squeeze depending on how vol moves post elections. Selling calls and buying puts is the more aggressive trade. I believe we have a sideways consolidating market with a bias towards the downside as time progresses. Therefore selling vol strike november and buying vol strike december could be the best strategy.

I also recommend creating long short portfolios, shorting weak technology names and going long index. Oil and copper also looks like a good shorts on this squeeze.