Slope Of Hope with Tim Knight

Back to the Hybrid Model

Well, this morning was the final straw for me. Everything was looking ship-shape for a nice tumble today, and then ol' Ben came out and said whatever he needed to say to crash the dollar and goose equities again. The GDX, shown below on a minute bar chart, nicely expresses how a very clean breakdown was turned around 180 degrees.

I have gone long sixteen carefully-chosen equities. I am still keeping a big chunk of my portfolio in cash (a little over 50% right now), and I've got a 30/70 split between long/short. So, effectively, I'm only 20% short the market.

In any case, I cannot depend on the market going down in order to turn any sort of profit, so I've got a hybrid portfolio again. The cleanness of the NASDAQ breakout is simply too evident in order to not have a single long position.

Sad Bear Bar

Ursa Morta

Thresholds

Well, the bearish case seems to be getting weaker by the day. The blowout earnings report by Apple (which, let's face it, isn't much of a shock) is almost certainly going to mega-goose the market tomorrow, and only God knows what Bernanke is going to say or do to propel things further. I am seeing more and more of this kind of story hitting home pages:

I have remained mostly in cash this month, and I'm currently long DRN and JNK as hedges. Everything else is little short positions.

I offer the charts below without further commentary. They simply illustrate what I consider thresholds of various indexes which, if crossed, each represent another nail in the bears' coffin. Maybe they'll be reached; maybe they won't. In any event, they merit observation.

Unmitigated Victory for the Bulls

In spite of all the reasons - - analogs, statistics, stochastics - - that were emailed to me about why the market would absolutely, positively, no-doubt-about-it fall this week.........it isn't happening. Indeed, the bulls have pretty much owned every single one of the eleven trading days so far this year.

The bearish case is getting weaker by the day, and the bulls were able to create breakouts across the board today.....

+ without any announcement from the Fed
+ without any big news from Europe
+ without any "stimulus" goose of any kind.

Just plain, old-fashioned, earnings-driven buying.

Oh What a Day

New Positioning

They're just not going to make this easy for anyone, are they?

Last night, after the close, I was hanging out in the comments section, and I allowed myself to be persuaded that buying a big SPY position might be a good hedge. I jokingly referred to my fellow Slopers as "turd monkeys" for nudging me this way, but I'm glad for those turd monkeys this morning - - it has helped take some of the sting out of a painful morning for the bears.

That Perpetual State of Disappointment

This is one of those "got to get this off my chest" type posts.

I cannot help but feel very disappointed in today's action. It's not so much that the market isn't doing what I'd like it to do - - that's something none of us can ever control - - it's the fact that the way this market is behaving is rewarding rule-breaking and punishing rule-following.

One of the most basic rules is to let profits run. You don't close out positions the same day you open them just because you happen to have a small profit. You let them run, updating the stops along the way, and hope that they will blossom into big winners.

Well, that's what I try to do, and it's not working. What we're going through today is a perfect example of this. Yesterday the market fell nicely, and I had a handsomely-profitable day. Now that the Summit is done, it seemed that things were in line for a continuation of a soft market. Irrespective of one's views of what the market was going to do today, the fact is that there was no logical reason to scurry around just before the close and shut down all my positions just to take profits.

But that is precisely what I wish I would have done, simply because the market is rocketing higher today. It seems that we're on an endless cycle of up/down/up/down/up/down/up, and it's enough to break one's spirit. After all, if we can't manage to hold on to gains for more than a day, what's the point of any of this?

I took some profits on some of my riskier positions earlier today, and I've bought a big block of DIA (and shorted a medium-sized TLT) to help balance things out. But this market is exhausting, I've got to tell you, and as much as I'd love to pretend to wallow around in the joy of trading every single day, I'm frankly getting awfully tired of this. I imagine some of you are, too, and I wanted you to know you're not alone.

Eighteen Hundred Points

Well, the Dow has rallied about 1800 points in the past couple of months, since the October 4th low. Nothing's really changed since then - - the U.S. is still, by any realistic measure, bankrupt, and the systemic issues of the Euro crisis are probably worse than ever.The "super-committee" to address U.S. debt did a joke of a job, even to a cynic like me, since they gave up pretty much instantly. Sentiment, however, has changed mightily, and we have another big rally on our hands today.

I still focus on cash as my only acceptable "long" position, in spite of potential opportunity costs. My disposition remains to move my short-position-percentage up or down, depending on the circumstances. I remain in "risk off" mode, at about 30% short, 70% cash.

One item I've pointed out, tongue-in-cheek, as an interesting reversal indicator is ERY, but today puts a bullet through that fellow's forehead. It was cute while it lasted, but this - like DUG - is getting trampled to lifetime lows.

How's My Day?

Not so great!

That shouldn't come as a huge surprise, since I was short. The good news is that the very thing that I've been griping about so much - - - my refusal to overly-expose myself in this market - - - is what is saving me today. I came into the day 70% in cash (the rest in small shorts), thus I am down 1.38% as of this writing, in the face of a Dow that has been up almost 500 points.

So, as bad days goes, this one is quite survivable.