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.

Consolidation.
Stocks and gold prepare to move
higher. Dollar lower.

-Mr. Volatility 12.DEC.09

Trader Art

Next Stop $1250

Ready, Set

Meanwhile, back at the office, Flash and I are discussing life and markets. Flash has been on and off the payroll for years. Strategically, I employ him as a sometimes/sometimes-not consultant. I remember when I knew he and I would work together. We had met through some money dealers in Asia, and he was describing some of his best trades.

“You’ve had a lot of great trades. How did you prime for so many good ones?” I asked.

“By being able to stomach the bad ones,” he smirked.

Ever since then, Flash and I have collaborated. If you’d like to communicate with him directly, try him at flash at mrvolatility dot com.

Positioning

My year end positioning remains the same. The trend in gold and silver remains up, and I am still looking for new highs into year end. In this instance, I am not the market. Be that as it may, I can control my entries and exits. I continue to monitor world events. Like any other trade, the most important thing is the exit plan. Don’t let winners turn into losers.

Private Eye

Due to the media’s obsession with sports icons at the moment, I feel it appropriate to update my readership connection on my relationship with Pinky Megiston. Here is the deal: our relationship continues to be appropriately inappropriate. I will explain. Pinky is my client in that she pays me a retainer for private investigation services. We are also romantically linked. I know you are thinking that this dual intimacy is highly unbecoming, as in most circles it is unacceptable to date your client. But in this instance, the faux pas is forgivable—if not favorable. The logic: everything has been disclosed online.

Words

It’s been a while since I’ve written. Special Ops assignments require intermittent withdrawal from the world wide connection. It’s great to be back, however, and I would like to I’ll leave you, the faithful, with some relevant words (the ones blaring in my ears as I write in fact). No one lays it down like the mighty Mos Def:

“You know you can’t stop my go
You can’t stop my go
Born to be who I am
(Been born to be who I am)
Bright light from a distant star
(Bright light from a distant star)
Miracles, answered prayers
(Miracles, answered prayers)
Huh, all in together now
You can’t stop my go
I’ve been born to be where I am
A bright light from a distant star
Miracles and answered prayers
You can’t stop my go
I’ve been born to be where I am
Mos light from a distant star
Miracles and answered praaaaaayers…”

And the beat goes on.

Obviously, I am in Dubai.

Despite a significant widening in sovereign default swaps last week, the dollar remains in a downtrend, gold in an uptrend. Therefore, nothing has changed my year end positioning. I remain bullish on gold, silver, and select stocks.

I do not think that anything that is happening in Dubai will be the catalyst for a sudden spike higher in the dollar. If anything, it will cause a move back into the Yen (¥JPY) as the carry currency, as it is least likely we see a systemic devaluation in Japan.

Even better, it will increase demand for the ultimate flight to safety–gold. The move in gold is in it’s infancy. It must go higher. It can’t not.

And the beat goes on.

US Dollar / Gold

It all started with Suzi Quatro. Though a Detroit native, she was a bigger hit in Europe. My cousins over there turned me on to her records. She later dated Fonzie on Happy Days. After Suzi, there were a chain of others including Joan Jett, Chrissie Hynde, and Sheila E., and of course you, Gwen.

Until we meet again.