Tuesday, April 01, 2008

Black Tuesday Redux - April 22, 2008

Today was a massive (nearly 400pt rally in the Dow Industrials).

Gold was crushed.
The dollar soared.
Financials - yes, FINANCIALS - were "en fuego"

Despite my recent hypothesis that we were due for a (temporary I was thinking) trend reversal, and my attempts to position around this trend reversal, I got a pretty significant haircut today in pretty much all my "core" position trades. And, from the looks of my picture, you can see that the last thing fuBarrio needs is another haircut!

All kinds of technical resisitance levels were violated and blown out of the water.

Transports (yes, TRANSPORTS -- those guys paying $4/gallon in diesel) were spiking higher and looking very threateningly "bullish".

What caused the mini-boom?

Who knows.

On the news front UBS announced a MONSTER writeoff -- $12B or so this quarter. Anounced the chairman was stepping down...and oh yeah, they were creating a separate entity to offload all their "bad paper" into. Hmm...heck, sounds bullish to me!

Lehman Bros. raise convertible preferred in a separate stock offering which pays a higher divvie, and dilutes the current stock holders. Event though they've assured us multiple times in the past couple weeks that they have 10s of billions in cash and assets easily convertible to cash....so why did they need to raise more money? things that make you say, "hmmmmmmmm....."

Thornburg Mortgage narrowly avoided chapter 11 by raising over a billion dollars in cash on a bond offering (or convertible preferred i forget which) with a return to investors of over 18% return -- I'm not exactly sure how a company writing mortgages in the 7% area, and has a cost of capital of 18%+ makes money. I guess they'll "make it up in volume" (?) -- stock spiked higher on the news of course.

So.....what's a "bear" to do?

It certainly makes no sense to get caught on the wrong side of the trade (whether it's a true resumption of the bull or just a bear market rally). The old saying is, the market can stay irrational longer than you can stay liquid....or something to that effect.

However, after some meaningful analysis of star charts, tea leaves, chicken entrails, and hemlines....(the hem-lines have no meaningful analytical value pertaining to economics...fubarrio just likes analyzing them)....I've come to the following conclusion:

On or about the fourth Tuesday in the Fourth month in the eight year of the third millenium......(i just said it that way to make it sound more "numerology-ish"...I'm talking about april 22nd) there will be a rise in the "fear" surrounding wall street.

Leading into this day (on or about) there may be a gradual and slowly building fear....that part is unclear.....however, on or about april the 22nd there will possibly be an "event" that will lead to a flight to quality (selling of speculative securities).

While we are still looking to what kind of briefcase Ben Bernanke takes with him to testify before Congress tomorrow for full confirmation, the chicken entrails also point to the third week of May as also very significant. However, the tea leaves point to the next week or two as being your last best chance to sell into the rallies, since the drawdown in the third week of May will be preceded by the breakdown on or about the 22nd of April.

(By way of full disclosure other "more sophisticated analysis" - or so they claim - that involves communing with the dead thinks a powerful rally will take us into the "middle of the summer").

As the volatility decreases (usually caused by rising or sideways movin stock prices), I will be buying put options (bets the market is going down) with expirations in June or July.

All April Fool's jokes aside, there isn't a shred of real hard fundamental or technical analysis that backs this "feeling" up (at least none i can share with you). So, please don't take any of this as "financial advice". It is merely the rantings of a crazed, wounded, hideous, animal....

....but, if you were already thinking about lightening up on US equities anyways....this week wouldn't be the WORST time to move to the sidelines for a while.

in Gold news....it's sitting right over the 100 day moving average right now. Some people think it breaks under as early as tomorrow....which would prob mean more dollar strength....I don't know. The big number everyone is watching is the 200 day moving average....this is under 800 i believe. If it hits that and bounces the bulls alive. If not, it could be a long summer for the gold bulls.


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