2010 Previous Columns

July 2, 2010             Leave Of Absence… Continued

7:00AM New York time. I had a lot of thoughts run through my head yesterday in thinking about what to say this morning. Obviously yesterday was a painful day for anyone long gold or short the Euro. That's me on both counts. I think it was the worst single day percentage loss I've ever had. Once I got over the not-even-feeling-like-talking-about-it part, I started getting that upset-with-the-markets feeling… thinking about all the things I was going to say about how the markets have changed, how they don't seem to be consistently on any one theme, and how the participant base has narrowed so much that those that are left are simply trading against one another… looking for stops and then going back the other way… just day-trading.

More time passed and I cooled down even more. All of those things I said above (plus many more) may be true. But markets are just markets. And if there is anything "wrong" then it is in how each of us relates to them. I was the one that left without stops… or a call level… or a device to keep tabs. I hadn't had to for the past few months. Well guess what….. I do now. The fact is, I DO think much of what I said above is true. And no… I can't leave the markets for any single day without communication and/or risk protection any more. Yes that does speak volumes to the environment we are in. But that's the way it is. If I still want to play, that is what I have to do to stay in.

The question I ask is… am I still equipped or do I even WANT to deal with them on these terms. Can I be successful with my particular methodology in this environment. My friend Jim has always said success with markets is all about context. If you've got a particular set up that works with your personal psychology and methodology that's great. You need to stick with that and hope nothing changes. You should certainly not change anything YOU do. The problem is markets are dynamic. They change from under you. I never had a problem being out in oyster land and managing to run capital at the same time. I would have my plan set up, have my orders in, and it wouldn't matter that I didn't watch every wiggle up and down. Much of the time it worked out better that way. Perhaps I had grown too complacent… and yesterday was a wake-up call. I will certainly never leave without stops or a call level again.

I am currently out of all my positions. I need to rethink these markets and how I approach them. I probably need to take some time off. I have not been as focused on markets lately as I should be. Asher Joseph remains a handful. The oyster business is going nuts. Sales are at record highs and the call for more just keeps building. Our Co-Op is debating a price increase. You know… I said some years ago the markets would become increasingly irrelevant for a society (country) where people are focused on doing "real stuff". That's happening right now for me on a personal level, and yet it is more painful than I ever imagined it would be. I should be happy. But I have spent years watching markets… and I truly enjoy the psychological interplay of how crowds deal with news and information and how it plays out in price. True… I don't necessarily enjoy big moves one direction one day and then another big move right back the next when there's no underlying flow.. But hey… it's not about the markets… it's about me.

I have decided to take next week off to get my head together. One way or another I'll post again on Monday the 12th. What my decision will be at that point I have no idea. Good luck today with Payrolls. I have the luxury right now of not needing to care.

June 30, 2010             Leave Of Absence

6:00AM New York time. I am in the midst of one of the more frustrating periods in my trading life. I maintain what I think is a decently confident macro view of the markets, but my focus and sense of timing on them from a day-to-day standpoint is off. It's almost as if I have lost just the amount of edge to stay ahead of these things. Yesterday I stopped myself out of my long S&P position. Only a day before I had initiated it in favor of a long dollar position. Last week I got stopped out of a unit of gold only to have it come right back. These types of events have happened plenty of times in the past; it's just that this time I feel like I've lost my edge… that my focus is just off enough to land me on the wrong side of the profit line. Instead of slowly adding to P&L I am slowly eroding it. Granted… there IS a lot going on in my life right now with the new baby and all… and all of that will pass… but it begs the question as to whether or not I should talk a little break… or simply change my trading style position wise such that I don't get shaken out of trades.

June 28, 2010             Quiet Monday

6:00AM New York time. I don't see a whole lot in the news this morning or out of G-20.

Unfortunately for me I bet on the wrong horse on Friday. My play was to stay with my long dollar position in favor of longer stocks. The dollar reversed earlier gains and ended up lower on the day. Stocks hung in and ended up higher. I am long a very small S&P position but not enough to offset the lower Dollar Index. From a chart perspective, today looks even worse. I am more convinced the recent lows of 1063 (approx) in the Sep S&P will hold, making it less likely that the recent lows of 85.75 (approx) in the DXU will hold. We are already very close to those lows now and my theory has always been that the closer current prices are to major price points, the more likely it is that participants will collectively push the markets to test them and take them out. I feel no different about this one. It was a good spot to take a shot at long dollars but there are no guarantees in the markets.

The fact that national economic news has taken a turn lower recently and caused fears of a double dip to resurface should not be a deterrent to owning stocks. From my perspective, intermediate trends and sentiment in equities remain out of phase with the real economy. My anecdotal indicators are OK. I think this morning I am going to add some equity length and put a couple of bids in. I'm not going to pay up right here for the whole additional unit as stocks have had a bad habit of spanking those that chased strength or weakness.

I don't see anything worth talking about in gold this morning either. We are very close to the highs. Gold has been climbing its own wall of worry this run and I think that adds up to grudgingly higher prices and trend sustainability. I know it keeps shaking me out of too much leverage. Those are all good ingredients for eventual new highs and a continuation of the leg.

Bonds remain stocks plus sovereign debt fears. I am still short a small and aggravating position.

June 25, 2010             Kiss Of Death… Epilog

6:00AM New York time. Sure enough… I got stopped out on the additional position of gold I bought on Tuesday. I was working a 1232 new low stop, 1233 being Mondays reaction low. As it turns out, prices traded all the way back to 1227 or so before recovering. You can say I should have held on, or I can be pissed that I didn't… but the purpose of stops is to keep negative P&L changes from getting out of hand. I was pushing on the leverage a little with the extra unit. It was a trade. I remain long a core position. If the market had not recovered, the entire position would have been in greater jeopardy because of my lack of discipline. Anyway… it's the same story as before. I don't see that any REAL technical damage has been done to this market, unless you view a recent loss of momentum as something significant. Everybody likes to be long markets that keep going up but the reality is that they stall, and backfill, and hesitate, and correct. All we have here is a minor case of lows probing a little deeper that I had traded for and a few extra days and more indecision about continuing the advance to new highs. Gold is and has been the best long trade for me cumulatively over the past 4 years of trading. It deserves a chance and some loyalty.

The Dollar Index is my next favorite trade. I still think we are in an extended correction to a multi-year bear market in the dollar. I has been working all year and I think participants will come flocking back should any number of European potential negatives start to surface again. The low from last week's euro spike and reversal continues to hold and we have now retraced a decent chunk of that Euro reversal. Again… if I were looking to initiate a position for the first time this would be a good spot to try. You can pay just over 86.00 this morning and stop yourself out at new lows below 85.40. What's 60 points at $5/point for a chance to initiate a trade that has been working all year and had been reluctant to correct for long periods and let participants back in on weakness? But hey… that's just my trading style.

The potential fly in the ointment for the dollar is stocks. I have been saying I thought the S&P futures could hold the 1040 (roughly) lows. And one could buy retracements back toward that level. I had not yet done so but I was thinking it… in my mind. So that opportunity now presents itself. We are weak again this morning. It is a Friday… always an interesting day especially when we've had a volatile, directional week. But if I like stocks here from a contrarian/trading standpoint, then I should be worried that the dollar will go lower if stocks rally. That is a correlation that HAS managed to endure during this period of general correlative breakdown. So I have a choice to make… the dollar or equities? If you held a gun to my head I would choose dollar higher over stocks higher, and vote with my positions that we will take out those 1040 S&P lows before we get another up-leg in the Euro. So there you have it. Now the only decision is whether or not to follow my own trading advice and add a little more length to the Dollar Index long. I don't know that answer to that yet, which is probably a good thing because lately anytime I've told you people about putting on a position it has blown up in my face. If you don't know then it can't get me right?

I think today too I am finally going to toss in the towel on my token 10-year short. I have been short a minimum position just to stay involved, but even that has become a major irritant. It's gotten to the point where I don't even want to look at it anymore. Some of you may take that as a contrarian signal. "Long-Time Emotional Bear Tosses In Towel". Have at it. Better you than me.

June 23, 2010             Kiss Of Death

6:00AM New York time. The server wasn't yet cool from my post on Monday touting the resilience of gold… before it reversed early gains and ended up down 2% on the day. Sometimes you're the dog… sometimes you're the hydrant. I bought a little bit more on that dip (actually on Tuesday morning very early). Even though gold seems (over time) to be able to move higher regardless of the weekly direction in either stocks or the dollar, I think it IS susceptible to the one-day shock. For example… last week, gold and stocks we're doing better together. So Monday it looks like equities are going to have a gang-buster up day on the Chinese reval news, but the market started fading early and closed lower. Gold did the same thing… it knee-jerk reacted higher (along with or because of equities) but closed sharply lower for the day. But yesterday it managed to stabilize and even start to recover despite downside follow through in stocks. Yesterday would have been the perfect excuse for more weakness, maybe even a technical break, and would have supported a return to positive correlation… but it didn't. It did the same thing in early June, losing 30 bucks right around when the Euro bottomed and started bouncing. But since then it has gone on to make new highs… while the Euro has continued to advance. It's not so much that the dollar going lower against the Euro was all of a sudden a BAD thing. It's just that it was a CHANGE. And gold reacted to that CHANGE with participant uncertainty, AKA profit-taking. These one-day/two-day "shocker" events, seem to end up being ultra-short-term corrections that keep participants a little off balance (a good thing) and keep the position skew from getting too one-sided (also a good thing).

So now… because I try to write this piece every Monday Wednesday and Friday, and I do TRY to talk about markets and trading, I'm going to give the gold market another big smooch of death by saying that it continues to act well, corrections are sharp, violent and short lived… as they should be in a bull market, and I don't see any technical or behavioral reason to be anything but long. There you go… I've just invited bad juju to come crashing down and give the market a black eye for a day or two (or just until I get nervous and sell part of my position).

As for the Dollar index… and let me start by apologizing for not picking up on the Chinese reval news on Monday. I wrote the piece and posted it and then next thing I know… headlines are everywhere. As it turns out… it wasn't much of a big deal by the end of the day. It's not like they announced they were going to allow the Yuan to float freely. And they already have been allowing it to appreciate gradually for some years now. After listening the news in greater detail, it seemed like pre-G20 posturing to me. OK…ok… back to the DX… I think all this market needs/needed was a sign of stability. I think we got that on Monday with the upside reversal from the weaker opening. We had some additional strength yesterday. We have now somewhat isolated that intraday low from Monday morning. If I wasn't already long, this would be exactly the kind of entry situation I would look for. We've had a decent correction, in what still is arguably a bull market, and we have an isolated low that can act as our stop level. If this market is still good to the upside, that low from Monday has high odds (at least from a trading risk/reward standpoint) of holding. If it doesn't… well you stop yourself out at a small loss, lick your wounds, and look for another spot to try the strategy. That is of course unless you're actually bearish the dollar. In which case you're probably looking to sell into any kind of rally we have from here for an eventual move through this past Monday's low. Markets have something for everyone I always say.

I meant what I said on Monday about equities. I think you can buy dips but I also don't think you want to chase them to the upside. So maybe yesterday you bought some.... on that weak close. I didn't. It just wasn't enough for me. Yeah it was two down days if you include Monday's reversal. And yeah… by the close yesterday it had cut pretty deeply into the recent bounce. I don't know… I just didn't do it. It probably has to do with my various levels of confidence with each of these markets. I have no heartburn buying gold on a 2% down day, yet I don't have that same feeling with the S&Ps. I'm sure that hesitation will cost me money in lost opportunity. I bet yesterday's close turns out to be a good trade up. But I also need to feel comfortable. And I certainly haven't been so hot that everything I touch works. That's part of it too. I still feel like I'm spinning my wheels a little bit and not getting anywhere.

Treasuries. Treasuries just suck. Talk about a market that's all dressed up with no place to go. Oh well… I guess plenty of people would tell you bonds are doing exactly what they should be doing in a zero inflation environment with a weak economy and 10% unemployment. Who cares about the deficit or the amount of borrowing that has gone on to try and stimulate the economy back into recovery, never mind the amount of new paper we have to sell every quarter just to finance obligations we had before. That is not a concern for now. All I know is… the day will come. The day will come.

PS… If you're headed up to the G-20 later this week in Toronto for some reason or in some capacity… and you like oysters/seafood. Stop by Rodney's Oyster House and sample some of our "Mystic Oysters". They ordered extra this week though I'm sure most of that was for their hotel customers.

June 21, 2010             Happy Solstice

6:00AM New York time. It's the longest day of the northern hemisphere year. I have finally updated my weather chart below. If you read this on FXA/Plant's Corner then you have to go CT-Oysters to see it. You probably don't care. I wanted to get back to keeping it updated for several reasons. One is that weather data… like any other data, is recalled with selective perception. We believe things to be so and so our individual minds pick and choose from our memories and experience to support what we want to be. So when I find myself thinking that this has been a "warm" spring, I find it instructive to consult the data to see if that is actually so. Another reason I like to keep that chart around is as a constant reminder of the cyclicality of our existence… our lives… the markets. The reality is that (for much larger cosmic reasons) we generally operate within a historical set of environmental bands… just like average daily temperatures. And while we experience periods of warmer than normal temperature… as well as periods of colder than normal temps, we will be rewarded regularly at the range ends to fade the extremes… just like markets. Can the range ends stretch out farther than we might expect any given time? Sure? But they will ALWAYS come back into the range and eventually visit the other end.

I wake up this morning to higher gold, higher stocks, a lower dollar and higher Treasury yields. I added to my dollar long on Friday, so now more so that last week, being wrong on the dollar is washing out the impact of being long gold. Gold is by far the best trade I have on. Dollar up-dollar down… it doesn't matter. Stocks up-stocks down… it doesn't matter there either. We are making new highs. Volatility is not excessive. We seem solidly in the midst of a period of steady participant accumulation.

I remain long stocks and short bonds too. Just not enough of either. While I think stocks are a buy on dips, I am reluctant to chase in here. And none of the dips over the past week have been deep enough to get me back. So here I sit, unwilling to chase but not being allowed back under my conditions. How many times have I been in THAT predicament? My thinking is that stocks stall soon after retracing to some reasonable level somewhere between the April highs and the recent May lows. 1122.5 would be a 50% retracement off those May lows. We sit at 1125 right now with close to an 1130 high put in this morning. 1143.5 would be a 62. We're close enough to make me cautious. I continue to think these markets will reward those who are patient and wait rather than getting sucked in when one can't take it. Longer term, chasing has not been a path to success. The current stock market run is just another example of the equity market being "out of phase" with the news and economic data. You have been far better off the since the Mar 09 bottom being long stocks when things looked and sounded bad, and short during times when it looked like things were improving. That's human nature. That's trading. That's not a good thing for broader participation in equities. It's also the weather chart a lot of the time.

My Dollar Index position is my chief source of anxiety… as it's the one that's not working right now. We have retraced somewhere between 38% and a 50% of the move from the April bottom to the early June high. We could go quite a bit more and still not really damage the uptrend. A 62% move would take the Sep DX back to around 83.80. That's still a long way from where we are now. I think the dollar is going to be one of those moves that last the whole calendar year. It turned higher right around December. It has made money for participants all year. I think once we find a pullback level that holds for any length of time, all its going to take is a minor spark and participants are going to come flying back in to get long for another leg. More European woes simmer just below the surface.

Well… that's it for today. I see no reason to say anything about bonds… for now they still depend on what happens in equities and the perception of stability of other sovereign debt. Bonds are a second derivative trade. Today is a day I typically try to see both the sunrise and the sunset, and we're already set for the former.

June 18, 2010                 Sweet Spot Of The Year

7:00AM New York time. So… the fact that gold could go up regardless of the direction in stocks over the past week was indeed a bullish observation. Gold has not yet made a new high in futures prices. I'm not sure about cash. We have three old highs sitting just above current levels at like… $1252, $1255 and $1253. These three price points are a target; like a kid in school with a "kick me" sign on his back. There is no way participants are going to get this close and not see what above for order flow. Capital is on the move and gold is one of the destinations. I have no price objectives other than to say a breakout above these old levels would be very bullish, and perhaps signal that the second-half of the up-leg we started in early March is underway. Here's another thought; bull markets like this don't end with a whimper and a roll-over. They end with a whoosh. It is far more likely that gold ends its multi-year run with a last parabolic spike that drags any and all participants into some level of participation in gold, and creates a concern if not panic, for economic policy makers. None of this is even remotely on the radar of those pulling the levers of power. I believe history would say that it WILL be on the radar before all this is over. If prices were to pull back to the high 1230's I would even be tempted to buy one last unit.

I'm torn in regard to the Dollar Index. I think more troubles are ahead for Europe. As Dave Lewis told me some time ago, just like Rome, capital will retreat to the inner core of the empire (the US) as the edges erode. But shorter-term we have sliced through what I had thought were some pretty important levels. I am maintaining a small long position which I am willing to sit on for now, but my chief interest is in adding to that position for the next fresh round of Euro-woes. What we are seeing now is just a correction to excess position skews. Anywhere between current price levels and 83.50 in the DXU is fair game. Yeah… I know… 83.50 is 200 points away! That's a lot of P&L with the wrong position size. For now I guess I'll just stay on top of my friend Jim's sentiment work, and keep in touch with the price action for a point where the market seems done with moving on news that "everything in Euroland is OK now".

Stocks might be running out of gas a little here too. I know I talked about the 1100 level in the S&P futures as being important… it was and is. For me, taking out that level is more confirmation that equities are OK to buy on weakness. I will say this though: Stocks are doing the closest thing to human hara-kiri that I have ever seen. I guess I shouldn't say stocks… because it's really participants trading/investing their positions. Yet if there was any kind of price action that would deter the small investor from having confidence and returning to the market, it's what we're seeing now. Equities are totally out of phase with the economy. They have been since March of 09. They made a major bottom on the worst Payroll number in a generation. They rallied through some terrible economic data and all manner of weak anecdotal information during the balance of 09. Then we finally top in April of this year… just as the data and information start to say that maybe things ARE getting just a little better. Now… once again… we are seeing some weaker data surface and yet the markets seem willing to confirm that the flash-crash lows and retest will hold, and the indices can move higher. To the un-anointed… this must seem like sheer lunacy!! It's not really… but it is very "human". My bottom line is this… Wall Street spent the better part of three decades, starting, in the eighties, through the early 2000's convincing average Americans that they needed to be invested in stocks to be ready for retirement, college, all manner of longer-term, bigger ticket financial goals. Now it seems we have embarked on a period that is convincing people of the opposite. Saving no doubt is good, but stocks as the vehicle are risky.

Bonds remain a waiting game. I am more excited about the (eventual) bond trade than anything else. Yet it remains farther on the horizon than anything else. In fact, world events and domestic considerations are actually conspiring to push yields LOWER even as the Federal government's need for capital pushes debt ratio's into dangerous territory. It is what it is. Bubbles are bubbles and you have to let them play themselves out. You could have gotten killed stepping in front of the real estate bull market in 2004 too. The ticket is to keep your eye on the ball and understand what the implications are when the cracks start to show. At that point one needs to go for the jugular in terms of trading. I need to have confidence that we are talking about a WHEN as opposed to an IF. The objective observation is that US Treasuries really are acting quite bullish near-term. They go down grudgingly on good news and strong equities, and they rally sharply at any hint of weakness or bearishness in equities.

June 16, 2010                 Gratifying In One Respect

6:00AM New York time. Yesterday was gratifying in one respect. Gold went higher along with stocks. During the week before's weakness, gold went higher BECAUSE of weak stocks. If gold can perform in both environments, and it is increasingly showing that it can, that is a very bullish thing.

Aside from that… S&P's broke through 1100 on the upside. I think that was a technically important level. I'm not saying they can't pull back at any time but I think one probably needs to be a buyer on dips. I think Treasuries would be acting weaker than they have been if there weren't the threat of further sovereign debt ratings downgrades which drive passive investment flows towards US governments.

I'm not sure about the Dollar Index. It sliced deeper yesterday than I expected it would. Corrections are critical mass phenomenon. So long as they don't make the majority of current participants too uncomfortable, they can hold. Markets can go to all sorts of sentiment extremes and trends can remain intact for a very long time. But reach that critical point… start probing into price levels where the P&L pain starts to hurt and all of a sudden the walls can come tumbling down. 85.75 in the Sep contract is about as low as I would want to see the DXU go and remain positive.

Fundamentally my view has not changed. Debt concerns will get worse in Europe in the coming months. The real US economy has put in a bottom, but local and federal fiscal headwinds will be an enormous obstacle. Still… I think Main Street is coming increasingly disconnected to Wall Street, and is slugging things out at their own pace. Corporate America does generally seem to be in good shape. The stock market is completely out of phase with the economy. It anticipates ahead of any data and then when data starts to show it retreats. This is very disconcerting to the small investor. They continue to lose faith.

I remain long gold, a small Dollar Index position (I stopped myself out of some yesterday), long a small S&P position and short a small 10-year position.

I hear a kid screaming and I've got a pile of oysters to pack today. Adios.

June 14, 2010                 Ahhhh Monday

6:00AM New York time. Stocks had a good overnight session. There was nothing negative out of Europe, and to be perfectly honest, US stocks on Friday reversed what could have been a bad day on weak Retail Sales. That's a good reaction to bad news. Yes… Consumer Confidence was stronger… so what? The numbers everybody was initially concerned about were the Retail numbers. If you want to gauge the importance of news and data, you have to do it pre-release. Set the board ahead of time so to speak. That way you won't be like the financial news and have to look like asses and blame the rally on a jump in Consumer Confidence, which was a sideshow number going in, and try to quietly sweep the major number under the rug. Anyway… all of this had led to typical other-market reactions. The dollar is weaker and bonds yields are higher. Gold is managing to hang in… up a couple of bucks.

I still maintain the gold can go higher regardless of what stocks do, though gold does seem to better right now under "risk off" conditions of a higher dollar and retreating stocks. The dollar and stocks are inversely correlated and it just depends on the latest news and price reaction as to who leads. I think stocks are leading this morning. Obviously bonds simply continue to track stocks.

I maintain that we are close to or at some interesting technical areas for both the S&P and the Dollar Index. The top end of the trading range for the S&P for the last month comes in at 1100. We are 6 points from there right now. The Dollar index has a huge shelf of support centering around the 87 level. Again… we are there right now. If either of these levels get violated significantly, we are going to have a whole raft of technicians calling "breakout", or "breakdown" as the case may be. I am still playing both markets as though the range will hold. I've said it a zillion times over the past two years… these are not markets where you trust to buy breakouts.

I do believe stocks are in a new bottoming "process". But I do NOT believe we are in an environment where positions are so the wrong way, as they were a year ago March, that it's just off to the races. I think this one will take time, be broad ranging, and not make life easy for participants.

All of the above feeds into my general view that we have capital markets these days that are dominated by professionals, without a lot of broader passive money flow… at least for equities anyway. You know… last week during the worst of the stock market swoon, I heard a guest on Bloomberg mention we broke the 200 day average for one of the indices, and that was a major technical red flag. Well guess what? We are up sharply and every day since them. It is my view that professionals and even retail… has become so much more savvy, that what would be historically major technical levels, have actually become points of entry. Professionals are actually buying the breaks of these major levels. And since there is no passive money follow-through, the critical technical break actually becomes a short-term bottom. And those who follow the "traditional" technical view of their significance are doomed to get run over.

I remain long gold, long the Dollar Index, long a small S&P position and short a small 10-year note position.

June 11, 2010             Yachting Gloves

6:00AM New York time. Yesterday I saw what's wrong with America. We had a man and woman running a beautify rebuilt wooden sailboat right off the shop during the afternoon. The only problem was, they didn't know how to sail. We noticed they were having a little trouble out in the mooring field. So they headed back toward shore, but kind of crashed lightly into the town dock right next door. Thankfully it was a light crash. No damage was done to the dock or the boat. With some instruction shouted from our direction, plus a little hands-on help from several people at the dock, the couple managed to secure the vessel safely. I managed to catch the conclusion of the ordeal, and I couldn't help but notice that the man at the wheel was wearing his yachting gloves. I mean… he didn't know one end of that boat from the other, but he made damn sure he had his yachting gloves on! Perhaps a different pair would have prevented the mishap?

This country is full of people with all kinds of money but who have no character or substance. You can buy a big sailboat and spend gobs of money gussying it up… but in the end, you still have to know how to sail. If there is one thing that I hope comes from all this financial turmoil, it's that we realize as a country, that having all the toys and accumulating piles of "things" is not the measure of a person or his or her character, nor is it the key to happiness or satisfaction. And further… that a financial services industry that does nothing but take from one pocket and put it into another, only to reverse the process subsequently, might be a generator of income, but it is NOT a productive endeavor.

I can say all this of course because I AM involved in a productive endeavor. And I will also continue to use the capital markets as a tool of self-improvement. Trading old school. No algorithms… just a view of the world overlaid with simple technicals and a basic view that the financial press will always over react at the ends. In the end though… for that part of me... I too still play the game.

Despite yesterday's rally in stocks, I don't believe we have broken any technical new ground on the upside. We need to get above 1100 in the S&Ps to really put shorts in the hot seat and make long-only accounts feel they're missing something. Until then I can make an easier case for more trading range action, with a stall and roll up here, but ultimately seeing the lows hold too, with an eventual bottom getting put in. I'm going to trade it as though we actually have a better chance to fail at 1090/1100 this time than go through. Treasuries will do whatever stocks tell them, which means yields back down if equities run out of gas here. Gold acted remarkably well yesterday given the strength in equities and the weakness in the dollar. Gold has done no technical damage either and I see no reason to worry over it being overdone… being over extended. In fact I bought a little back this morning. I still think gold and stocks can go up broadly together over time. The same can be said for the Dollar Index. We've pulled back to the 87 area, which looks like it should be good support and certainly an area below which I can stop myself out from with minimal risk. I added a little to that long position too. If we start breaking down through the 86.50/86.00 area, I'll start bracing for a bigger correction.

PS... Now Abby Sunderland… SHE'S got character!

June 9, 2010                 No Fresh Ideas

6:00AM New York time. Not much for fresh ideas this Morning, plus I have an infant strapped to my chest right now. I'm basically reaching around him to get to the keyboard. I sold some of the S&P long yesterday morning and sold a small piece of gold on Monday. Still think long stocks and short Treasuries has potential but this Europe thing does not give up. And the bounces are anemic. It may be that I'm still early if not outright wrong. I still have the other side though… long dollars and gold. My read is that the real economy is slugging it out and increasingly not concerned with what happens on Wall Street… other than being pissed about getting sucked in on 401k's.

June 6, 2010                     Like Monday The 12th

7:00AM New York time. Well… Payrolls were strongly directional for equities on Friday. The problem was it came in on the weak side and the direction was down. Fortunately… with my new lower leverage, slower accumulation strategy, I was in a position to add on that dip. I bought one shot of S&Ps down 20 points and called it done. I also sold an initial short position in US 10-year notes… which fared about as well as the S&P position. Also fortunately, I added to my gold position down 10 bucks and that reversed to close nicely higher on the day. Altogether, with my existing long Dollar Index position, I ended up making a little money on the day. Ahhh… now what about today?

The weird thing is, all last night watching prices and the equities trade lower, it felt a lot like the Monday morning after March 9. I had a good buy signal on Friday, but early Monday the market was weak. I stopped myself out back. This time, my positions are a little smaller and a lot more balanced. So I'm still in there. Will we end up with a nice recovery day? Who knows? I just said it FEELS like the Monday after March 9th. There is little I can say right now other than I'll have to wait today out and see what happens. Once again we tested recent lows in the equities. Holding and recovering is always a better thing that slicing right through (for the bulls). Might we simply be a ball bouncing lower and lower on the rebound each successive time? Sure? Then I'll be wrong and I once again crawl under a rock to lick my wounds.

I had a thought this weekend about setting up a real time news/data index for updating on these pages. It would be to take the top 5 economic stories off Yahoo Finance news (mostly AP wire stories) and determine if the reporting coverage was positive or negative the economy. Then I could create and index with it, and chart it against the plus/minus for the benchmarks of the major capital markets. Today was going to be an experiment day to see if the whole thing made sense. Unfortunately my new boy had other ideas so we'll pick it back up Wednesday.

June 4, 2010             Unlikely Trades

6:00AM New York time. It's a Payroll Friday. What if I told you I thought Payrolls had a good chance of being directionally reinforcing this time around? I can't remember the last time I said that. I can't remember the last time I felt it. That's where I think we are. It gets better. What if I told you I thought the US Dollar, gold, and the stock market… could all go up together? Perhaps that one is a little easier to believe. One thing that my "trading smaller" strategy had done is allow trades to stay on the sheet for longer simply based on their own merit. It does not allow for any preconceptions about correlation or cross market contamination. If a trade seems like a good idea individually one day, it goes on. If it continues to perform, it stays.

I will go back to something I first started saying a long time ago. Unlikely trades can also be the most sustainable. In this case; the fact that US stocks can do better in a rising dollar, rising uncertainty (gold going up) environment seems unlikely from a fundamental standpoint. And yet that idea makes the trade all the more sustainable. Who out there would tell you that gold could go up in a rising dollar, rising equity environment? Also unlikely. Yet here we are.

Now of course gold may have made a top two days ago and we are on the verge of rolling over into bear condition… but that's not the way I am playing it. In fact, I want to buy this latest dip at some point. I myself like the gold chart. Back in May we held the 1170 level after making new highs at around $1250. Now we have just finished rallying to $1230 and are setting back again. I think we hold in the $1200 - $1190 area and then proceed to trade back up and through the $1250 highs. If we have embarked on a new up leg after the December through April consolidation, then symmetry dictates that we go a lot farther than $1250 before it's all over.

As for stocks… I am guided right now by my friend and benefactor Jim's proprietary indicator. I have watched it work from the sidelines many times and I want to be aboard this time. Plus I can make the case that the recent 12% pullback in the averages was enough to refresh. I didn't say I thought we were going back to the April S&P high of 1220 anytime soon, but I think we can at least retrace a lot of the down move since them. I also like the fact that we tested and took out the "flash crash" lows and bounced back.

The dollar is an animal. It has been rising since December and despite pinning every sentiment indicator known to analysts at extreme levels, it refuses to come off. I think this is a function of the depth of participation and conviction we had from the short side going into this year. We had been in a multi-year bear market in the dollar, culminated with everyone from OPEC to Oprah wanting to get paid in Euros rather than the dollar. Sorry Oprah… I know… it's a joke OK? But in all fairness… that kind of stuff should have been an indication that things were a little out of whack. Why is it so out of line to suggest that we might need a year of trading to correct that degree of excess… especially in a risk aversion international environment?

The only leg I'm missing in all this trade matrix is short Treasuries. Ironic huh? I've been fighting with Treasuries all year from the short side and now I finally have supporting trades on that direction… and in the black mind you… and I don't have a short 10-year position. Unbelievable. Guess I should do something about that this morning. OK… so by the time you read this I will be all set up (still small mind you) for a stronger Payroll number that has "stickability". We'll see if I'm right or if my view is like so much summer hot air. We here in the Northeast are in the sweet spot of the year right now. Daylilies are about to pop, fireflies are going off everywhere after dark and the sun is out till bedtime. It doesn't get any better than this.

June 2, 2010                 Just Going Through The Motions

6:00AM New York time. Lately I feel like I'm just going through the motions with this column. Part of it is the distraction (and work) of having a 6-week-old at home. Part of it is the fact that things have gotten really busy in oyster land. This year all three of my wholesale accounts have asked me for increased volumes. I am trying to accommodate them but it is consuming more and more of my time to do so. I'm not complaining mind you, I'm just stating the facts. And the last part of it is the markets themselves. We are experiencing a heightened state of emotion among participants, and I think that renders a lot of the tools that any of us use less reliable. On top of all that is the simple fact that mediocre performance is simply not as exciting and motivating as making money. If I were up 15% I would probably find a lot more enjoyment in the experience of writing.

All of the above said… I will also say that all of the above are perfectly natural conditions. Yes an infant around the house can disrupt the normal routine. Increased business activity can divert energy use from one professional area to another. And yes… when one is flailing about in the markets it is very easy to lose motivation. I had a conversation with my friend Jim the other day and he did 90% of that talking. Now THAT'S unusual.

From a market perspective, I don't think any of this is a bad thing for trading. Trading for me is not about the time I put in front of the screen. Trading for me is about observing key developments at key points in time and acting on them. I actually do better not watching the screens all day. I leave resting orders and let the market prove me wrong or right. And it's not like I'm shying away from making controversial calls either. Right now I am trying to accumulate a long S&P position. I think that's a pretty contrarian view right now. Still the nagging feeling of sitting here with nothing to say hangs over my head like a cloud. I could very easily wrap this up and go do something else.

I guess the key thing is just stay with it for the continuation factor. If this column is indeed a chronicle of a single trader/investors evolving development from a professional sense, then it should follow the highs as well as the lows… right? I should take comfort in the fact that markets are always in process of their own evolution too, such that frequently, out of periods of little or no opportunity come periods of abundant opportunity. The ticket as a trader or investor is to stay with them… keep watching… keep probing.

Once again I managed to put together 4 paragraphs for posting. Most of it this day is about my own neurosis and insecurity. That's OK… I'm starting to hear noises from upstairs which means my time is running down anyway. I'll get in about a half hour of baby support before I have to run out for an early start packing my ever-expanding Wednesday shipment. In the meanwhile… you can go off to other parts of the web and hopefully find something that may actually help you make money today. All the best.

May 28, 2010             The Point Of Greatest Strength

6:00AM New York time. I know this column has been short on impact lately. These markets are less about what is going on in them than in how each of us deals with them. Obviously I'm had my own struggles; market related and otherwise. Just because volatility in equities was to the upside yesterday, doesn't make it a good thing. Here's the way I'm playing everything from here on out. First off… I should review the macro:

The dollar is going to stay firm through the balance of the year. This is a trade that has been with us all year and I think it stays with us for the rest. Problems for Euro Land are not going away and they WILL resurface again. The US economy HAS put in a bottom and is trying to turn higher. It is a real bottom I think… having nothing to do with finance the capital markets or banking. The world of zero interest rates and bank profits is also smoke and mirrors. Equity prices ran far ahead of the real economy for a while there and have at least corrected some of that excess. As the economy grinds itself higher, pressure on rates will relentlessly grow. In my opinion the positioning that can carry me through the balance of the year is now long equities, short Treasuries, long the dollar and long gold. You could throw oil in there too if you want. Volatility is not going away however and there will be days and sets of days where it looks like all this is coming apart. Equities will tumble, yields will fall. I think you use those days to add to positions.

I have 3 of those trades on but not in very good size. My strategy had been, as it always has been, to look for windows where the market is ripe for a move and then pile in. The problem with these markets are that you could have the right trade, but get that leverage on a day or two early, and get crushed … or stop yourself out to keep from getting crushed. My new strategy is going to be to start with smaller positions, but then be there with bullets in the gun for those inevitable shakeouts and mini-panics. Being right to the day is a lot to ask anyone.

The fundamental themes this year are very simple… it's the trading execution that is hard. I prefer to focus on the latter as there is ample commentary and analysis already concerning the former. In Europe, the ticket is to stick with the theme even though the politicians and the powers that be will bombard you with rhetoric that the final solution is in. The key is to use those periods where the markets are acting like everything is OK to put on the macro trade. The point of greatest strength is actually the point of greatest weakness. That's a quote from my friend Jim and it will echo in my head till the end. It is sound thinking to live by.

For those of you who care, (or are even still out there), I am finally posting again to CT-Oysters.com.

May 26, 2010 Trying To Get Back On Track

7:00AM New York time. Trading is a funny business. I don't really WANT to be a trader. I would much rather be a once or twice annual capital flow cycle investor. I have been long the Dollar Index since February. I have made basically no changes to the position and I've got almost the whole move for the year in it. Of course I'm not BIG enough in it… still… at least I got it right. I'm a trader only when I'm forced into it. Take the S&Ps yesterday. I got sucked in and whipped around like the most inexperienced doctor/lawyer market sap that's even been. I bought strength (relatively speaking), and stopped myself out as close to the lows as I care to admit. You'll have to admit though, that was an amazing display of volatility; down almost 32 S&P points at one time during the pre-market, only to reverse and close higher on the day. And of course equities took bonds pretty much for every step of the ride, the Euro somewhat less so. The only bright spot (no pun intended) was gold, that reversed on its own and well ahead of the paper asset markets. You know things are rough when people invest in commodities because they're less volatile.

You'll notice too I haven't been talking much about news or data. For that matter, I haven't even talked much about the market's REACTION to news or data. These markets we are in are being driven by emotion and algorithms. To tell you the truth… I'm not sure which one is worse. I DO know this; I am living proof that you will get nowhere in these markets by chasing them. I tell myself this every other day, yet I STILL get sucked in on a regular basis. If anything these markets have provided regular and multiple opportunity to buy distress and sell relief… sometimes both in the same day. If I want to start fishing around for a bottom in stocks, there is certainly no reason to initiate with prices in the green for the day. And if that trade means I can poke at Treasuries again from the short side I should at least make sure to pick a moment in time when they are up on the day. Christ… T-bonds can make the case they are in a bull market right now. There's a winning strategy for you… initiate short positions on weakness in a bull market.

The primary theme for this year is exploding public sector debt and the ramifications of increasing government participation in support of the markets. No matter what wiggles we have experienced along the way, that theme has repeated emerged again and again as the dominant force. We also have secondary storylines of financial reform and the economy. I believe the primary theme stays in place for the entire year. That theme is driving in primarily a higher dollar but it has also been a net positive for gold and US Treasuries, and a negative for stocks. I do however feel that equities can easily over-react to it, pushing prices way past equilibrium, and setting up a good buying opportunity. I also feel that despite the flight to quality we have seen, more Federal debt in the long run is NOT bullish. The short Treasury trade will eventually come to pass even if it has not yet. As for the economy; everything I am hearing from my anecdotal sources tells me things are improving. While stocks may end up being a drag on sentiment, I feel the public is increasingly viewing Wall Street and the financial markets as a bit of a joke. I believe the giant firms of Wall Street have a commensurate view of their own self-importance to the larger economy… a view that the general public is slowly gravitating toward.

What all this means is that I am starting to poke around for a bottom in equities. By default and despite the setbacks, I continue to poke around for a top in 10-year note prices. I think the dollar and gold both go higher regardless. Say what you will about equities falling back of a cliff, I think the opportunities to buy big breaks for a long position are a lot easier to hang with and more profitable than to always be waiting for up moves to run out of gas and try to capitalize on relatively fleeting bear moves. That's all for now. I feel I am slowly getting back on track with life after the events of the past 6 weeks. Trading continues to be back and forth and I remain down about 5% on the year. We're about at the halfway point but there is still plenty of time and opportunity left.

May 24, 2010             Eating Your Own Arm

7:00AM New York time. My friend Jim's proprietary equity indicator slipped into buy territory on Friday. I have missed several of these signals in the past… always to my detriment. Even before that, on Friday, I covered my small S&P short as well as the bond short. Lots of people have gotten very wound up over recent global capital market developments. What better time for a historically reliable indicator to start flashing a contrarian signal. Of paramount importance in these conditions is to not let your emotions run your trading/investing. Again… if what has gone on HAS reduced broader participant base confidence and participation… leaving a higher ratio of professionals… all the more reason to be sensitive to start looking the other way at "extremes". Let's not forget how quickly we can return to the rigged game. I bought a small long position this morning already and will probably do another piece before the 9:30 NYSE exchange open.

If I have a reliable buy signal developing in equities that is probably going to mean a return to creeping higher bond yields in the weeks ahead. I think any move will be grudging given the level of anxiety out there, but then too, how often do spike down conditions present themselves for position entry. I may put on a small position just to say I'm participating. The short bond trade has been torturing me all year and has blown up in my face several times already. Even when stocks were rising during Q1, bond yields were loath to move much higher.

Even if stocks just stabilize, I think it leaves the door open for both the dollar and gold to return to trend. Panic conditions tend to upset the apple cart even in markets where one might assume there is an obvious benefit. The reason is; people start trading P&L rather than separate positions. Trades that have made money come off simply to fund or cushion the blow from ones that are not. Yes… it seems odd that peak uncertainty would actually hurt gold, but remember, it's not just about gold, it's about the people who are trading gold and what is happening elsewhere to them. I remain with a small long gold position and a small long Dollar Index position.

Lastly today I want to talk a bit more about that whole narrowing of the participant base I touched on Friday. This goes back to the whole Goldman affair. Gilmore had a good analogy… that of eating your own arm. Proprietary trading may be the profit backbone of Wall St these days, but it is ultimately self defeating when your counterparties are your customer base. It's everybody's profit center now. Yet prop trading to the extent we see today is a relatively new phenomenon, and I think mostly unknown to the customer base until recently. The Goldman allegation simply brings the practice out in the open and shines more light on it. There is no Chinese wall that can keep customer order flow information from the prop desk in this age of technology. So ultimately, either prop trading has to be reduced or customer order flow will be reduced (or simply channeled into direct-exchange electronic links). Prop trading goes away sooner by regulation, or goes away long term because increasingly customers do not put their order flow through traditional institutions.

Jan 8, 2010                     Rules Of Engagement

7:00AM New York time. Wednesday I talked about my capital market observational Matrix. Today I want to talk a little about my Rules of Engagement. That's a personal set of money-management rules that I use to keep myself on the straight and narrow. Now that I have an objective decision making criteria laid out, I need to have a set of money-management rules under which I can execute those "objective observations". I once heard a good trader say that with disciplined money management, one should be able to pull money out of a market even trading against the trend. I'm not sure how easy that would be… but it makes the point that every trader could better their results and reduce their overall risk with good money management. My rules of engagement are simple as well. First and foremost… I do not leverage into losing positions. So… for example, with the short Dollar Index, which I actually exited yesterday, there is no adding to positions until that first unit is in the black. How do I deal with early entry… or entry whenever there are decent odds that the market can (and frequently does) come back against me? In that case, I will go to flat each time, re-executing that first initial position until I finally get the timing right, or I reach my next set of rules. The point behind this is two-fold. I will actually never have a chance to build a position until the trade starts to work. Second, this allows me to always be coming at the markets (and against other participants) from a position of strength. I have talked about this before. Being down on a trade versus being up on a trade makes a tremendous difference in one's personal market psychology. Struggling with a losing position brings self-doubt, hesitation, reluctance and timidity. I could go on. Being up on a trade… playing with house money, breeds confidence, aggressiveness, surety. It makes a huge difference in how one approaches the markets. We are emotional beings. Failing to recognize that and account for the negatives of that as they affect trading, is simply one huge package labeled denial.

My next rule down the chain is the three-strike rule. Just like in baseball, every batter gets three swings at the ball per at bat. So I allow myself three attempts at establishing a winning base-line position. After that, I'm out!  I have to sit out that trade for a while. While I have frequently skipped around this rule, I want to get back to at least taking it seriously, as if I was going to live by it completely. The concept is good. The three strike rule forces me to be very picky and patient about what entry points and at what points in the sentiment/news-data cycle I am executing at. Do I need to stick to it literally… no? But I want to try. Wall Street is littered with the careers of bright people who had the right idea but the wrong timing. One of my old bosses, Michael Aronstein was a commodity bull back in the mid-nineties. His idea was that demographics… China and India would drive a secular recovery in commodity prices. He was right but about 5-years too early. He no longer has his own fund and is working for a living like so many others. Jim Grant is a brilliant thinker and analyst… but he's the last guy you want to follow in terms of trading. The point is to acknowledge first that your timing could be wrong, rather than that it will be right.

OK… that's it for today. I've got to get going. I am still long my initial S&P position. I have not added anything to that. I stopped myself out of my short Dollar Index position at a small loss, and I put on an initial short US 10-year note position. I didn't have a specific data reaction to justify putting the 10-year short on, but short Treasuries is one of my macro trade ideas for 2010, and they had rallied a bit since the start of the year, so I had some moderate strength to sell into. Actually… you play devils advocate and make the case that Treasury prices have been slightly higher this week despite stronger economic data, which according to the Matrix, would argue for being long. However, the net price movement for the week so far is small, and they were sold very heavily late in 09, so I can defend myself by saying they had a bounce in them somewhere regardless of the data. We will see. The bond short trade still needs to satisfy the other criteria as we move out in time. Today is obviously a huge day for all the markets with the December Payroll report. It is not only the first major test of the new performance period, but it will close the first week of trading, and give us our first look at the net weekly capital flow after all has been digested.

Jan 6, 2010                     The Matrix

6:00AM New York time. No… not the cinematic version with Keanu Reeves and Laurence Fishburne. It's my personal financial matrix. I mentioned on Monday that I was going to get back to basics this year… keep it simple. My shtick has always been that price drives news. George's idea of reflexivity… sure you get major news from time to time. But generally, capital flows where it wants to flow. And the job of the financial news media is to justify that movement… helping make us all feel better about living in a rational, linear world. So MY matrix looks like this:

Last year, one of my problems was that I started to anticipate. Toward the end of the trading year, I started looking for what I thought was an excess position skew in several of these markets to drive a change of direction. Rather than taking my cue from price action as it responded to news, I stepped ahead of this process and began to ANTICIPATE. Tell you what… my advise to you is NEVER anticipate what the markets are going to do. You can be PREPARED… but don't anticipate. Markets have an uncanny ability to push the bounds of "rationality" far beyond what many professionals might expect. Perhaps it's part of being too close to the game. A quick example… big flows of money in and out of mutual funds can be a huge driver of equity prices… right. Do you think the public has the same perception of market sentiment and excess position skew as myself as a commentator, or yourself as a reader? No effing way! So by overlaying our personal gauges of sentiment on the equity market, we may totally be misreading what is going on in the underlying (and massive) capital flows.

This is one of the reasons I am very big on the start of the new trading year. From a P&L standpoint, and from a position standpoint, it is very pure. The longer we proceed through the trading year, the more muddled it becomes. This same purity is why I want to get back to my own roots, my personal watermarks of market sentiment and trend health. It lessens the tendency to anticipate. It lets the market tell me what it wants to do rather than having me guess at some arbitrary turning point based on my own personal, and frequently out of synch sense perception of sentiment and skew.

I am proud to call myself a contrarian. But there are times to play that card and times to keep that card in one's hand. In fact, knowing from experience how easy it is and frequently it happens, that markets push the bounds of excess, it actually behooves the trader/investor to hold that contrarian throw until the last possible second… even waiting perhaps until the game has actually started to move against the other side. I have plenty of opportunity to play the contrarian… even outside the world of finance. Winter is upon us here in the US Northeast, and all across the country for that matter. And as many forecasters and weather analysts have already told us, we are experiencing the coldest winter since 1985. Yet I say to you even now, that we live under the umbrella of the greatest planetary reversion to mean system that will ever be. So just as forecasters are getting us all panicky about how much heating oil we are going to use, and how numbingly cold it is going to be, I am looking for a turn back toward mean. The sun is lengthening its stay one minute each day on each end of the day. It is relentless. And our historical statistical low point is fast approaching… the 22nd. I can play contrarian all I want in the world of weather forecast and anticipation all I want and not have it cost anything. The world of human activity is far more veiled, and harder to read. In that world I am going to try and stick to what the markets are telling me, hopefully keeping my anticipation in check until it is truly needed.

For the record… I bought a small long S&P position on Monday late and sold a small Dollar Index position at the same time. I went with the price direction that resulted off the first major news/data release of 2010… the December ISM data. I did not short Treasury bonds. They were actually higher on that news and have rallied further since. Friday will obviously be another huge opening test for the markets.

Jan 4, 2010                         And The Race Is On!

6:00AM New York time. Well… I never followed up on posting the rest of my New Years trade ideas late last week. In fact, I spent most mornings over the holidays quietly reading for pleasure. I must say… it WAS a pleasure. Sometimes you've got to just leave this stuff behind and give yourself a break. No matter. Its not like markets were open much of the time, or I was going to make any decisions prior to seeing what happened this week. In fact, I'm going to try to keep things as simple as possible yet again this year. The most important thing for me in starting off the new trading year is to be open-minded. I don't want to have any preconceptions about where things will go and how the domestic and global economy for the year will evolve. My anecdotal information, whatever that might be, did little for me last year other than throw off my timing with the capital markets. That is NOT what trading is about. I want to be in synch with the capital markets, not fight them. So long as my P&L is tied to their performance, my personal views on the economy and the markets should take a back seat to what prices are actually doing. I'm almost glad I didn't cover my 2010 equity market views prior to the opening of the trading year. That alone would have put a predisposition into my head. I believe that, similar to last year, the performance of the global equity indices will play heavily into what all the other capital markets do.

As such… lets start with equities. They have gotten off to an up start this first trading day of the year. Equities will be a huge driver of what the other markets do this year. It will be very hard to be short bonds if equities are under pressure. And if equities come under pressure, that will play heavily into any flight to safety trade… into the dollar and out of commodities. Equities are the lynch pin also because so much of their fate is tied to the "perception" of economic robustness. For example… I know a number of people who's spouses lost their jobs over the holidays in the lead up to year end. I know people (not Wall Street people) who failed to get their usual year-end salary bump and had bonuses reduced. Obviously… such information, if projected across a wider sample, plays to a bearish view. I am not advising that however. As I said earlier… my anecdotal information has tended to throw me off the future flow of money, not kept me ahead of it. The first official big hurdle for capital market participants in my view will be holiday Retail Sales. From non-official sources and weekly data, it does not appear that the season was a weak as originally forecast. On line sales and promotions help fill in some of the gaps in traditional retail channels. Expectations (and inventories) were exceedingly low going in. Markets have responded. We have had big corrections in the dollar and gold in the final quarter of 2009. Stocks never set back but have continued to climb a wall of worry. It is VERY possible that we are set up to get right back on last year's track of stronger stocks, a weaker dollar, and stronger commodities this year.

The only question is… where and when do we get started tipping our toe in the water. Part of me wants to wait out today's close to make sure we actually have our first closing day in this direction. What's to risk? Gold is already up $20 this morning alone. 10-year yields already have climbed to near 4%. And its not like stocks have run away on any single trading day. In the more intermediate picture (the daily charts), the dollar has come off little from its recent bounce and stocks actually pulled back in late in the final week of 2009. If one is looking for the best "bargain" to get back in the game with, that looks to be in equities or the dollar. Equities have been on a slow and steady grind the last quarter of 09 anyway. It's a tough question. Getting into the wrong lane was a big problem for me in 2009. I want to avoid that this year either by making better choices in markets, or eliminating the risk altogether by diversifying my positions. Do a little of everything so to speak.

So… I think where we are right now is to look at getting right back on board the same trades that we were on for most of 2009. I want to be aware to anecdotal under currents but not driven by them. I don't want to be scared away from a trade just because it might seem a well-worn theme. I want to be aware that these are not young trades (except maybe for bonds) but not kept from doing anything for fear that they will all of a sudden reverse. Sometimes the best trades are the simplest trades. Measuring sentiment is a very tricky task. There are many layers to that onion. I think the lesson to take forward through it all is to spread that position risk a little more evenly. And only max out one of the legs when the opportunity sets up properly. There you go. I will probably not initiate right out of the gate, but I'm reasonable sure I will have something on by tomorrow AM, and certainly by my next post on Wednesday.