Smoking Securities

Half Baked High Finance

Midnight Musing

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20% of stocks are trading below their 200 day moving average, the VIX is hovering around 30, the White House is expected to release some sort of temporary stimulus package, and tomorrow is options expiration… my bet is on a dead cat bounce. Though I’m mostly in cash, I’ve taken a position in the badly beaten Chinese index GXC, some ICLR, and AMED (which has a fantastic short position)… I’m sill short gold and silver (which goes against every ounce of my fundamental fiber, but remains profitable), and I expect Friday to continue the head spinning roller coaster ride that this past week has brought. Needless to say, I’ve lost a bit of capital this week, nearly 1.5% of my overall capital, but when I look at how the markets have been trading, I guess I can’t complain. I’d love to see a nice strong bounce, especially in the financials, real estate, and consumer discretionary, because I don’t feel comfortable going short at these levels. I think gold will trade down to 830-840 an oz before resuming its upward momentum, so there should be a few more points to the downside in my GLD short. SLV might trade as low as 155, but it is showing much more strength that I imagined, even though it tends to be more volatile than gold. The weakness in energy and materials has done some enormous damage to DIG and UYM, which may prove to be an excellent entry point for a bounce as well. On the other hand, everybody seems to expect a bounce, and that doesn’t bode well, because there is less conviction amongst the bears, and therefore less potential for a short squeeze. I watched an interview with John Thain, the CEO of Merrill Lynch, wherein he said he doesn’t expect to have anymore significant write downs because they only have another 4.8 billion in subprime exposure… guess that leaves prime loans to go bad, but only time will tell.

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Written by chucklesamadeus

January 17, 2008 at 9:17 pm

Posted in AMED, DIG, GLD, GXC, ICLR, SLV, UYM

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