Weekend Review

Last week the DOW dropped 4%. Plenty painful for bulls. Transports also fell 4% and while not technically broken yet I am operating under the premise that they are broken. The shippers, strong for long, are now looking weak. Airlines suffered big losses. FDX looks like it could fall off a cliff.

That's nothing. The NDX dropped 6.5% last WEEK. All of the mo-mo darlings (GOOG, AAPL, RIMM, etc.) got roughed up. That's important for market psychology. At some point investors will realize that technology will not recession-proof a portfolio. I'm short the cubes and AMZN.

I'm short the RUT via IWM and was a touch disappointed with the relatively quiet 3% drop. But that index still may look the worst of them all.

The dollar continued it's freefall. Yen was up 3%+. All week I liked the look of FXY and all week I passed it by in favor of other opportunities. Gold was UP 3%, crude was flat.

I don't have a clear feel for gold here. Keep thinking that it will correct but it has yet to do so. The fact that the equity markets got pummelled this week and gold was strong is a potentially important development insofar as gold needs to show it can trade on it's own, uncorrelated to equities. That may take some time. It seems extended in the short term. Silver has broken out and seems likely to go to $20/oz., but could also be overextended.

You could make the case for a bounce in equities next week. You could make the case for a crash in equities next week.

Certainly no one believes equities will go down during the holidays. Apparently, it's some sort of eleventh commandment. Seems a bit cute to me. Everything is unravelling but the true pain will be polite enough to wait until after we've all opened our presents?

I remain net short, somewhat aggressively. Going through my extensive watchlist this weekend, I don't see much of anything I would want to go long here. Nor do I see many stocks that I would really want to run out and short. I have only five names that excite me enough to initiate a position. All shorts. I'm probably about 65% of the way through my list of like 600 stocks.

No time to be a hero.

One thing that did leap out at me was European financials. They appear to be rolling over and may offer some opportunities next week as well. Perhaps it's setting in that the toxic paper isn't contained to just every US-based financial. We exported a lot of it too. Seems like widespread acceptance of that fact would provide the dollar a chance to bounce.

We should know more on Sunday night after Asia starts trading.