At the end of the member session today I said:
"Well that was a good which way Wednesday. The day is over and I’m still not sure what happened!"
Early in the morning I had said "This is definitely still a take the money and run market" and we did take a bunch of nice day trades and ran our $10KP down to just 2 remaining positions (HOV and VZ) with the 25KP half cash and the half that is not cash is half JOSB, which is as good as cash after today's earnings. It's a tough and confusing market and, as I pointed out back on a Wednesday in January, when the market was in a similar situation, "sometimes the only winning move is not to play."
We had a very nice sell-off in oil, right down below our $122.50 target and CVX took the news very badly and dragged down the Dow, with plenty of help from the financials even though it's looking more and more like the whole LEH thing is nothing more than a protracted hyena attack and the king hyena is named David Einhorn, who has enlisted the aid of a PR firm in order to spin his doom and gloom scenario to the media on the company he is the largest shareholder of on the short side. Why is it we think political attack ads are bad but business attack ads get a green light from the SEC? Read the NY Times link if you have a chance, it's a great analysis of how one man can enrich short-selling, while destroying the value of a company for millions of other shareholders with no regard for the truth.
Our pals at MBI and ABK got hit hard again and posted 20% losses as the always-inept MCO put them on review for a possible downgrade. If they fall another 20% I'll buy them both in case one of them makes it through but this should not have taken down the markets as it's really old news. Also old news is Bernanke speaking at Harvard where he told the seniors that they were probably going to be screwed by inflation so they should seek jobs overseas (or something like that).
We had nice Nasdaq leadership and commodities sold off so, on the whole, it was exactly the sort of confirmation day we were looking for and, painful as it was, our best course of action was to mainly sit on our hands and see if we can pick up some signs of rotation.
One could argue that we are in the phase 2 stage, where the economy is picking back up and we are moving out of energy and into basic materials and technology but basic materials already had their run and I think we are nicely lined up to move quickly into a nice tech run, followed closely by a nice move in Industrials and the long-awaited recovery in financials. On the whole, we are still on track for my summer recovery that should kick off after Q2 earnings beat low expectations but we do need energy to die so let's keep our fingers crossed.
With any luck we'll see crude at least test $120 tomorrow. Productivity rose from 2.2% to 2.6% and more productivity means less oil. Airline cutbacks mean less oil. Less driving means less oil. Ending subsidies in Asia means less oil while PBR et al keep fining – MORE OIL. I know Econ 101 hasn't been very popular with energy traders for the last few years but really folks….
All in all it was a good day. Everything is following the path we've predicted since last week, it's just that we're being a little impatient as the clock ticks on our June calls but that may be just because this is a 5-week period and we haven't had one of those in a while. Generally, I'd have to say we keep the same cautiously bullish outlook we had yesterday. As long as crude keeps drifting lower, there are lots of reasons for this market to head higher.
