Thursday's Rebound

Been keeping a close eye on Citi, GS and the overall banking index as a proxy for the market and these are diverging today from the overall strength of the market. In spite of Citi's cost cutting announced yesterday, the stock has done nothing. GS is also doing nothing today and this coupled with a BKX that is lower by 40 points has kept me out of the buying mood. I have some shorts, primarily in the tech sector and more longs, which are hedged with some SDS and some puts on the QQQQ and the SPY. I am not going to get too bullish here until we see 1450 taken out on the SPX and the bankers and brokers showing some sustainable strength. Would like to see the BKX back above 114, GS above 210 and C back above 53 before I get into a buying mood. So meanwhile, I am content to wait and forgo some money on the upside to see how this whole thing resolves itself. Fed comments yesterday sure seemed like they were in a wait and see mood, so I will join them and give it some more time.

8 days in a row

Mkt has manged to rally 8 days in a row, which is no small feat. With one exception, the moves have all been pretty muted, but it is higher none the less. There is a good discussion today of the competing views in Todd Harrison's column on www.Minyanville.com

I am still about 55% invested, with some QQQQ puts as protection. I continue to think that minus a big blow up that forces the fed's hand, we are likely to see higher rates before we see lower rates. Still positioned for the "inflation" trade.

"Sell" says one Fund Manager

Article in the FT today where one highly respected fund manager says that he has sold half of his holdings in preparation for a possible 20% correction in the U.S. stock market caused by a recession later this year. This story is supposedly getting a great deal of press on the street today, largely because there isn't much else going on. The banking index is weak today and I am closely watching C and GS as the "tells."

The prices paid component of this mornings ISM report renewed the markets inflation fears and has led to gold rallying $8.00 or so. With gold's strength, it is interesting how AUY trades a bit offered.

Shorted Best Buy this morning when it rallied after it announced earnings. That trade so far has worked nicely. It is hanging around support here at 48.10.....should trade lower if mkt moves lower into the close.

I have added to some index puts that I own and added some to my SDS position. Pared back a little in BA and GR. This is a good market to be cautious in.

Mondays sleeper

Had relatives in town all last week so failed to post.

Markets are quiet today having seen both sides of the flat line at least once. I have no strong opinion here and am about 60% invested and content to see how things progress here. The "tell" in the market has not changed, it is still the brokers and bankers which we keep an eye on through the indexes XBD and BKX. These are weak today and will keep pressure on overall market unless they see some buying interest. It is worth not doing much when the markets are uncertain or until you have a strong opinion. Much money can be lost trying to force things. I am content to wait and see what develops here. I saw New Century Financial, one of the sub prime lenders filed for Chap 11 today. Jury is still out on whether the sub prime fallout will cause bigger problems or be contained.

Good article by Brian Wesbury today at First Trust Portfolio's on Bernanke. Worth reading....
http://www.ftportfolios.com/Retail//Research/ViewResearchArticle.aspx?ID=296

Happy trading.

Thursday's Pause

Was out of the office all day yesterday and this time, I missed the fun. Today market is pretty mixed. I didnt think the fed would throw a bone the markets way, but they did and the market liked the taste of it and rallied. Today we are marking time, with some stocks higher and some lower. I have bought a little on this dip but content to be about 70% invested while holding a little downside protection.

Citi, Brokers and Bankers

I continue to think that the "tell" in the market is the bankers and the brokers due to subprime fears. Thus you should be watching C, XBD, BKX, and GS all as indicators of where we might be heading. It will be hard to have a meaningful rally if these don't participate. Of note this morning is an upgrade of Citi by A.G. Edwards. Stock is up almost a percent on this news. Wall Street Journal also reporting that Citi might be interested in parts of the Barclays, ABN deal that is as of now still not announced.

Credit Crunch

Read an interesting article this morning on TheStreet.com which I think is worth reading. Gets at this credit crunch fear that results from the subprime spillover fears. Check it out.

http://www.thestreet.com/_dm/markets/economics/10345273.html