Meanwhile, back at The Factory, the internet continues to be the largest communication platform I’ve ever been involved with. If I didn’t own the darned thing, I wouldn’t be where I am–in hiding.

On another note, some noteworthy happenings impressed me recently while speaking to my assistant, Tonya:

–Last week Goldman Sachs downgraded EPS estimates for the banks by 15%.

–The federal reserve hiked interest rates by 25 bps from .50% to .75% on February 19th in a surprise move. Since then, stocks have marched higher while volatility has slunk lower. There are various rumors making the rounds that the fed will repeat it’s actions from February–hike rates by 25bps in another “surprise move.” Moves are moves, but I definitely appreciate surprise moves and use them often.

S&P Futures / VIX

–Ratings agency Standard & Poor’s changed their ratings on Greece last week from negative to stable. Does anyone care about rating’s agencies anymore? Haven’t they been proven meaningless?

–I will be working the Ironman II premier in various locations, including Los Angeles. My client–Ms. Pinky Megiston–is involved with the show so though I’ll be there, absolutely no one will have any idea who I am. After all, not even I know who I am anymore. Whenever I have lost my mind in the past it has always led to bigger and brighter things. This time shall be no different.

Meanwhile, as the world turns, so does the Factory and it’s cast of characters. X is monitoring world events; The Consigliere continues to build his law firm specializing in the law of attraction; Pinky Megiston is beautiful; and Anything Anywhere! seeks more avenues through which he can add value.

Apart from all that, sovereign risk spreads are igniting. The dollar is catching a flight to safety bid and stocks are crushing lower–the S&P 500 is off about 2.5% as I write. Gold and silver have been pummeled most severely, off 4% and 5.5% respectively.

Sovereign risk spreads have risen dramatically this week, led by the European majors. Holders of sovereign debt—in particular Portugal, Italy, Ireland, Greece, and Spain—are running for cover. Not surprisingly, politicians will blame these events on speculators. However, a closer look at the money flows reveals true fear: real money is fleeing sovereign debt (selling government bonds) as opposed to speculators driving risk higher by buying credit default swaps (insurance). Nations with the largest deficits and the most in need of short term financing are being sold the hardest.

Dubai has continued to see risk premiums rise, as it scrambles unsuccessfully to sell off some of it’s holdings. Like a skydiver free-falling through the air, Dubai is reaching for it’s reserve chute. The velocity is building to the perilous downside. Hope is not a viable strategy here and now; but other than bluff, it may be all they have.

The crash of 2009 was not foiled—it was postponed.

We are sitting on the precipice of something special. An event where fortunes will be made and lost. Great art will be inspired, and an ageless tale will be re-told.

And the beat goes on.

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.

I am a trader
and Flexibility is
my reality.

And the beat goes on.

Stock market futures initially sold off on the payroll and unemployment headlines this morning at 5:30 AM PST. They spent the day recovering, and ended up rallying to the highs of yesterday.

S&P 500 Futures - 15 Minute

The Dollar sold off, squeezed the shorts, then fell to the lows of yesterday.

$USD Futures - 15 Minute

Gold rallied, pulled back to it’s logical limit, then rallied to near yesterday’s highs.

Spot Gold - 15 Minute

And the beat goes on.

Risk on trade is on.
Stocks up, dollar down, gold up.
Next year comes the storm.

S&P/Gold/Greenback