Fresh and Clean

Wednesday's watchlist is very different. My list has more breakouts than breakdowns and more buys than sells. It's also much shorter and tighter. In previous rallies I have sat out or worse yet tried to short into it too early. This time (should this rally have legs) I will look to get long. Been net long very rarely since last August. Think it might be nice for a change.

The erroneous theory, I gather, is that Merrill's huge write off, fundraising and sale of toxic assets marks the bottom. Never mind that the toxic paper sale was 75% financed by Merrill themselves and that two weeks ago they claimed not to need capital (was that a bald faced lie? and where the fuck is the SEC on this?). But now the market can function again and other impaired institutions can follow Merrill's lead. Divest, write off, nirvana. Or so the theory goes.

I agree that it's a step in the process. But I ask you this: who the hell is going to buy all this bad paper? There is so much of it everywhere. Besides if Merrill said this paper was worth 40 cents on the dollar two weeks ago and now they sell it for 20 cents on the dollar, what does that tell you about the balance sheets of other financial institutions? Pure fiction.

The psychology is such that bulls believe every disaster to be the bottom. Ultimately I expect us to go much lower on the averages but not in a straight line. We are due for a rally, before another fall. So again I'm rooting for a good old fashioned drunken rally where money mangers can do a few lines and buy stocks with reckless abandon. If nothing else I hope it might relieve this white knuckle feeling we've had lately.

Either way, rally or no, I will capitalize. I will trade long or short. I will cut my losers without hesitation. I will continue to learn and ultimately dominate. Put that in your pipe and smoke it.