General Stock Ideas

[bigworld]

MF4: I think a lot depends on what Bernanke says (or doesn't say) tomorrow at Jackson Hole. I don't think he'll disappoint his puppet masters on Wall Street. At the very least I think he'll announce that the Fed will use maturing bonds at the low and mid level of the yield curve to purchase the 30 Year. Which is actually a smart move. Our Treasury should be trying to lock in these low rates for 3 decades by going out longer on the yield curve. So I am betting that this counter rally will remain intact for a month or two. On the S&P our intermediate high was 1370 on
May 2nd. Since then we've had a series of lower highs (1359 on May 10th, 1347 on July 21st, etc.). We seem to have temporarily bottomed at 1101 on Aug 9th. That low was recently tested and hit 1121 intraday on Aug 22. As long as the market remains above 1101 on the S&P the counter rally remains and I will stay net long. I only have 50% of my capital invested in some ETF's like SLX and XME (my two biggest holdings right now). I also have some XIV which is still slightly under water. And I have some DIA and SPY. Most of these buys came just after that 1101 bottom so they are all green except XIV.
In a secular bear market the counter rallies typically regain 1/2 - 3/4 of the recent downward move. If we estimate from the May 2nd high at 1370 and the Aug 9th low of 1101, we have seen a move of just under 270 points. So we should regain somewhere between 135 and 205 points, so this rally should conceivable last until we see the S&P between 1236-1306. What I am watching is the VIX. When it drops under 20 I will start taking money off the table and going to cash. If we hit 18 I'll start going short again. If we drop under 16 again I'll go all in on the short side.
That's how I'm playing it. But I will have my finger on the sell button if we retest that 1101 low and pop through it to the downside. That would be a severe technical breakdown and could lead to another big sell off. Ultimately you know that I am pretty confident we'll see the S&P drop under 500 eventually, sometime in 2013. That low has not been seen since March of 1995.
But we'll get there eventually as this market sees precipitous drops, followed by counter rallies, followed by more drops. It will confuse investors, burn technical traders and momentum hedge fund managers. In this secular bear the market will go in the direction that will burn the maximum number of investors. When net shorts get too far out on a limb we'll rally. When the momo crowd goes out too far on the long side we'll drop. It is a repeat of 1930-1940. Deja vu all over again.