Weekly Review 03/20/2011

It has been a (long) week since I posted, I have been swamped, sorry.  This has been a hectic week and the market only multiplied the amount of work.  Our last post was the Saturday after the Earthquake/Tsunami in Japan.  I mentioned that I was still worried, and that I felt the US stock market would eventually feel some effects from the 3rd largest economy in the world, all but shutdown.  The Japanese market has been volatile, but the US market has attempted to match it.  Up 200, down 200, seems like a typical day now for the past couple weeks, and eerily similar to October 2008.  At one point the S&P 500 was actually negative Year-to-Date, after being up more than 5%.  I have updated our portfolio holdings, along with percentages in each cash, longs, and shorts Here.

Now we face more uncertainty in Libya and the Middle East, as the US has now sent troops over there.  By the way Obama was on vacation last week in Brazil, when he gave the order.  After last week it was reported he played his 61st round of golf since being in office.  ARE YOU KIDDING ME?  Not agreeing on policies is one thing, but simply not doing your job is a whole other issue.  When this country and world is struggling from Natural Disasters, war, and still face the possibility of another recession/depression looming, the US is desperately in search of a real leader.  It is like Obama took office in order to go on permanent vacation!  Although I am not sure he did much before his presidency considering he never voted for a single thing while supposedly in office.  At some point I hope America wakes up and would just simply educate themselves on what is truly going on in America.  It is if the majority have the wool pulled over their eyes, or just simply don't care.  Well they don't care, until they do and then it will be too late, that point will be when we are forced to stop entitlements, and then every one will have their panties in a bunch.  And now who knows what will happen with Crude prices, as I thought it would finally starts it downward descent to the mid $80′s, but I guess more ME crisis situations are popping up.  Is George Bush really in office with a Mask on?  HAHA, they seem to be doing very similar things.  ”Oh lets just send troops over to Libya, so we can fight in 3 wars at once.”

I digress, on to the stock market.  Last Thursday we switched from short Brent Crude (BNO), into short WTI Crude (USO), due to the fact I thought the Saudi Arabia “Day of Rage” would most likely be a null event.  Then on Monday morning I sold off our double long S&P 500 position (SSO) and shorted the Guggenheim Small Cap China ETF (HAO), and on Wednesday shorted China Green Agriculture (CGA).  I think China will be a loser in the whole Japan scenario, not to mention the chart looks gross, making lower lows, and lower highs, in a solid downtrend.  Overall I am bearish on China and emerging markets in general as they attempt to battle the inflation, the US so happily exported into their countries!  I think CGA is a fraud, along with any Chinese Reverse Merger company, as we have been finding out more and more everyday.  I will cover the short USO position early Monday morning, as I honestly didn't expect and truly hoped we would not send troops over to Libya.

The overall market is still in a downtrend and  until the down trend is broken, I will not look to get longer.  There may be some certain trades setting up, but on a very short-term basis.  A majority of the charts on my watch list have broken down, and look pretty ugly.  I know the market was pretty bullish on Thursday and finished positive on Friday, but I think Friday was actually quite bearish or at least uncertain.  We started hot and dwindled into the close, even on the news of the Fed allowing banks to pay/raise their dividends.  While I understand this may allow them to raise some capital, long-term I think it is highly BEARISH.  I firmly believe we haven't fixed any problems from 2008, and in fact compounded many of them, including our deficit and debt levels here in the US.  Japan will not be the last black swan, as many major issues are still looming.  IF we do in fact get a W shape in the market, the banks will be devastated!  Only time will allow this issue to play out, but I am NOT a buyer of financials, but maybe value/dividend mutual funds will now beginning buy bank stocks as well as overseas funds??

So I am staying market neutral at this point, with a lean towards precious metals, as I believe the intervention in the Yen will be inflationary longer term.  I already know we will have inflation in the US, and would argue we are already seeing it, investors just don't know how to handle the stag in stagflation.  Nike (NKE) recently announced margin compression due to rising cotton and commodity prices, which I believe is definitely not company specific and will spread throughout Q1 2011 earnings.  NKE took a drumming, along with other competitors, but I think there is more to come in that space.   The higher end retail names may be able to pass along more of the price increases, but I don't think they will be exempt.  Stay nimble, stay neutral, and look for opportunities!

S&P 500 Daily Chart:  (showing still in downtrend, next support at 1175 level)