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Wednesday, June 3, 2009

Market Direction

The market has been interesting since March 5th - 24th when I converted to a bull. The 200 DMA was an object of fixation, and on Monday it was penetrated with authority. Tuesday the market today was up a little to a new 2009 high.

Now that the emotional reaction to the market reaming I took on Monday has passed, I have been thinking of where to go from here.

I hate to sound like a broken record, but the basics are still there to be short vs long.
The market has now risen 42% in 11 weeks, which is incredible. To go long "here" means I expect 45-50% in 12 weeks?

Also gold/resources have been rising in cost. If this was truly a market rally, gold should fall, as fear pulls back. In addition resource cost rising hurts the economy. (Including energy)

Also the US Treasury interest rates are staying high, and is positioned to gain even more ground.

And finally the US Dollar is about to break the recent lows as it collapses against other FIAT currencies.

Lets review the situation and see what the US Fed and US Treasury will do.

GIVEN: US Treasury interest rates rise more, and as interest rates rise mortgages become more expensive, further killing the housing market. The last bubble was real estate, so this trend will stop dead in it's tracks any sort of housing hope. And lets face it, the US's true problems have not been corrected.

With Equities up 42% in 11 weeks, natural resources advancing, and US Interest rates rising, and mortgage interest rates rising, which is better for the US?

1) Equities at 50% up in 12-15 weeks, OIL at 80 bucks a barrel, US Treasury interest rates reaching pre market collapse levels, and housing market collapse accelerating as interest rates rise just as ARM rates reset.


2) Pull liquidity out of equities, causing the market to drop in price, resulting at the stock market 25% up (since March 10th) 12-15 weeks, OIL at 50 bucks a barrel, US Treasury interest rates falling, and housing market hope being kept alive as interest rates fall as ARM rates reset.

I am keeping my shorts, my lottery tickets, and expecting #2, its just a matter of time.
I'll update my short positions at a later date.

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