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Monday, June 1, 2009

Bull Market - Round 2?

The market has risen above the 200 DMA with conviction today. In a way I am relieved, finally the 200 DMA was broken, now the bulls have nothing but "Sky is the limit" ahead. Then as a bear market trader, its pretty frightening.

There is nothing wrong with taking down all your bets if we open up big tomorrow. I myself an torn of taking 10-50% down to reduce risk. On the other hand, if I had waited since March 10th for the 200 DMA to be crossed, today would have been the day I sold my longs and started getting short. But there lies the rub, started getting short, not all in short.

With the 200 DMA crosses, the bulls have a great argument for the market to soar, to over 1000 SPX.

The bear arguments I still have is the markets closed right at the 2009 highs not materially higher, the US economy is horrible, and the markets have rallied over 40% from the lows 11 weeks ago. It's possible the market "holds the 2009 high line" and there is a pullback from here. If the market closes higher than today's close at any time in the next two weeks, it is time to get protective of bear plays.

But playing the short side is ALWAYS painful. Usually at your most painful moment is the time to "double down". However this time, I am not so sure.

Lets take a look at the chart
From WebSurfinMurf's Financial Blog
It is ugly. The second argument for a market pullback is still interest rates. The US Treasuries had interest rates rise again. If we seek a few weeks of this the markets will fall purely on the rational that high interest rates are bad for business. For now, its party time for the bulls.
TNX below:

From WebSurfinMurf's Financial Blog

So what to do? Well, covering some shorts, selling some FAZ, TZA, and other short ETF's is not that far fetched. Just to take the edge off. I myself am going to try to lighten positions purely depending on how we end tomorrow. That may be a fool's play, as I lose some incredible amount of money if the market breaks above the 2009 highs with conviction.

As always, Gold Miners are doing good, that is always the safest play. And I probably should have all my money there instead of playing these short term games.
I'll post lottery tickets next.

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