Meanwhile, back at The Factory, the expansion continues and my mission is in motion. Extensive time travels have my clock out of whack. Life is so strange — Destination Unknown.
Conditions
S&P 500 - Weekly
Since the March 2009 bottom, we have seen an uptrend with little interruption. In light of some regression analysis, it is evident that we could go either way. This could be a time to buy the index, or it could be a time to sell it. Like a man on a high wire, falling down and being out of the game is not an option. But I must make it back to one side. Will it be the buy side or the sell side? In correlation, here are some data points that I ponder:
1) Dubai Credit default swaps have continued to trade wider, at levels not seen since November.
2) The Volatility Index (VIX) made a large move higher last week.
3) Volatility dispersion is at it’s highest level in months–indicating higher probability of a systemic problem and trouble with the entire structure of the market and it’s underpinnings. If the market is a sell, it will be best to short the market indexes as opposed to individual names.
4) Some individual names look as though they can move much, much higher from here. My re-positioning will depend on various factors that I will continue to monitor.
The New York Times Article regarding the change in accounting rules cannot be found on their website because they block their content.
Here is the essence of the article:
“Giving the market momentum was a change to accounting rules that could make some banks look more profitable on paper (emphasis mine). The Financial Accounting Standards Board voted to ease mark-to-market standards, giving companies more leeway in valuing mortgage-backed securities.”
Conclusion : Just because something looks better “on paper” doesn’t mean that it’s any better. Suspending this rule will, of course, backfire.
As the downtrend continues, I continue to be amazed by the amount of people that think the downtrend will not continue. Trends last longer than anyone thinks possible. The current downtrend looks like it has much much further to go. In the short term, I am working with the target mentioned the other day, S&P 622.
I have identified some cheap volatility in a couple of names. These positions will serve to enhance my portfolio of put positions that I will sell when the $VIX spikes higher than it did last year. Other than the REITS, my favorite shorts here are Google (GOOG), Research in Motion (RIMM) and Visa (V).
If you are not interested in the short side, there are plenty of bull markets. Three of note are the Dollar Index (DX H9), US Bonds (TLT) or (ZN H9), and finally Silver (SLV) and Gold (GLD).
The bullish bond trade is for the nimble. At some point this year, the US bond will be the biggest money makin’ vehicle on the street. Which way? Short. The Bond is going to be a massive short at some point this year. I’ll document it here. Stay tuned.
The reality is that there is always a reason to be bullish and bearish–that’s what makes markets. What we must discern is where the best probabilities lie. -Todd Harrison
Today, the equity markets staged a less than stellar attempt at displaying some sort of buying interest. Looking at a shorter term 60 minute chart of the S&P Futures, it is easy to see that we rallied in the context of a downtrend. Trends don’t move in straight lines. They ebb and they flow. I’d use today’s high as a stop with a target at about 622.
SP H9 60 Minute
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Silver is a bullish market.
The daily chart presents us with a great entry. Stop below Monday’s low. Small risks, big rewards. Stay Tuned. Trade the picture.
“All energy flows according to the whims of the great magnet.” -Hunter S. Thompson
There he goes. One of God’s own prototypes. A high-powered mutant of some kind never even considered for mass production. Too weird to live, and too rare to die. -Raoul Duke
Fear and Loathing in Las Vegas
There is lots of bad news hitting the futures this Sunday evening. American International Group (AIG) is being extended another 30 billion. What a joke. This is nothing but another attempt to resuscitate a patient that has clearly flat lined beyond any possible recovery. The mathematics are facing their implications in the world of AIG. On September 15th, the governor of New York said AIG is financially sound. Where is he now? This AIG news looks to be the catalyst for the next big move. Move which way? Move down in equities, but more importantly, move up in Volatility. Were you short the crash of 2008? Are you short for the crash of 2009?
Saturday, April 4, 2026 
