Thanks PB, I hope most understand this to be a short to medium term call only. On the long term front, I remain firmly committed to an upcoming, monumental shorting opportunity when this liquidity rally is allowed to run its' course.
In the middle of October, I began shorting the market figuring the technical bounce had run its' course. With the geopolitical background I was certain the market would tank in short order. My performance was pretty good for about 10 days, then I took a beating. At that point I realized that by allowing myself to focus on the war, terrorism, anthrax, etc., I lost sight of who really had the power here...namely the FED. For those reasons I recognize the India/Pakistan situation, but refuse to allow external events to guide my trading. Of course, I'll switch hats in a heartbeat if I must.
With regards to the FED, their interventions were meaningless prior to Sept. 11th. Interestingly enough, Bin Laden actually caused the exact opposite of what he intended from a market standpoint. The terrorist attack generated such massive short interest, that a huge snapback rally ensued. When the FED kicked their printing machine into warp factor 9, they finally were able to get the upper hand on market dynamics. Bullish seasonality led to fund chasing performance and voila!...We get a three month rally out of the abyss.
Now, since the recovery thesis is the dominant metric, this is the one that has my attention. Since I believe current earnings estimates to be low balled enough, I believe this rally will extend through earnings. Bullish seasonality typically extends to March and that template is still in play imo. The following quarter's earnings look like a good target to begin a tailspin, which corresponds to the bearish April to August time period.
With regards to the euro, I don't have much of an opinion there. Suffice it to say, I do believe the deliberate Yen devaluation is causing a deflationary pressure on other currencies which continues to artificially elevate the dollar. In the short term, this of course will keep money within the US capital markets. Of course, this won't last forever either, but I have no reason to believe it will end tomorrow.
regards,
st |
