Thursday, August 4, 2011

4 Aug 2011

Well.  If you stuck with me, you should at least not have been invested during today's rout - maybe you still had some residual shorts as I did on FREE and HTZ.

Yeah, I am guilty of always closing positions early.  I was short almost all the Europe banks (LYG, RBS, ING, STD, NBG, AIB, BCS) and know that I said BAC and C looked like shorts (in Feb) from Feb to June and disclosed some of those positions.  At one point, I was 200% short.  Turns out I closed way too early!  But whatever, this is a learning process.  Keeping profits is nice on shorts, but longs are where we need to get rich because of the math.  Max gain on short = 100% and the rate of return decays.  Max gain on long = Infinite (in the case of gold in about five years).  Always do today what everyone else will do tomorrow.

Anyways, enough of that garbage, where are we at compared to historical precedents.

 Hold short medium not at an all time high yet.
Hold short short term is quite high and passed the most recent high, but only slightly despite the indexes being 5% lower.

 Notice that this has only hit its Bollinger Band (200 day, 3 std) and not bounced once in the past four years.

New lows are jumping up.  Notice that the Dow is substantially higher than during the first Greek crisis, but we are making more yearly lows than we were then.  This shows substantial underlying weakness in case it isn't obvious.

And the chart that told us things might get bad around the end of July.  No, I don't have a revisionist history, that is the same line.  Currently the VIX is hitting its fourth standard deviation.  This looks similar to August 2007 where my cursor is.  It COULD get substantially worse before it gets better. 

My posts about VIX breaking out of that trendline that I talked about for months, and all hell breaking loose were quite clairvoyant.  Here is one of my recent "Get the F*ck Out post.  Yes, pounding my chest even though I didn't profit much from it.

So what does this all tell you? 
a) that this move is getting historically extreme. 
b) no, that doesn't mean it is time to buy.
c) that shit is really bad.
d) that if and only if, things calm down and McClellan flattens and heads upwards as well as if we get divergences on my indicators that it MIGHT be time to buy for medium term trades.  I will try to post actual tickers that I'm buying when that time comes. 

I personally won't be initiating new shorts here, but may if we bounce some. 

"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works".
John Stuart Mill

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