June 15, 2006

The Fed Blinks! - WHY? The rally was upon us anyway!

Oldest rule in the trader's playbook - Count on the WUSSES in the US government to pressure the Fed.

Today Bernacke has forecasted his hand to the world by saying the US can withstand higher oil prices. Is he just insane! He can't be that stupid. Oil has barely budged to the downside and prices are likely low compared to where they should be.

He has become a puppet in record time! He has forced himself into a rate cut on the next market decline. OIL PRICES ARE HURTING US. ALWAYS HAVE. THIS TIME IS NO DIFFERENT and based on our personal balance sheets - LIKELY WORSE.

He put a bottom in Gold tonight and it is up $18 TONIGHT! Fine with me.

This rally was coming either way. It is important to look back when things go right and things go wrong. It is one of the best things about a blog and SEARCH. I felt this storm brewing on May 12th . I started selling a little early, but did not sell everything and did not go short. STUPID! The trend was stretched but I was trying to stick to my plan of not timing the market.

When things seem extreme (like this past week), I set a gameplan and go to my trusted sources. Fed statements like today's are just icing on the cake.

On the markets, my best source for straight data is Degraaf from Lehman. I could sense the panic and I posted what I thought was the most important two charts he had. The VIX extreme and the mutual fund cash. Short-term, the VIX extreme offered me some insight from past patterns. The low cash position of mutual funds is a reminder that rallies will likely be shortlived. As good as today felt, mutual funds are tight on cash.

Tonight, Japan is up 500 plus points and gold up another $18. Bernacke's comments are fuel on a short squeeze.

The most important thing to remember about peaks and troughs in the markets, is the acceleration at turning points.

The last few days I posted that the speed of the descent was not sustainable for the MARKETS.

Those that overstayed their welcome on the shortside are seeing gains turn to losses. When I was active on the shortside in years past, nothing felt worse than days like today. Nothing is worse than being short when the market goes up. Nothing!

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