Wednesday, July 29, 2009

Chinks In The Armor

Been very busy the last couple of days. Was in San Antonio all day today and may be in San Antonio tomorrow. Working on taking a company into bankruptcy and then acquiring it as it comes out. Learning alot and get the normal adrenaline rush with such deals.

The last couple of days was very interesting. Some chinks in market armor may finally be showing. China has been the leading indicator. It broke down almost six months before the U.S. markets broke down back in 2007 and it set a November bottom never making the March bottom the U.S. made. Last night China was down 7.5% at one point before finishing down 5% (anyone remember the February 2007 drop). Then you have the dollar. Could not break resistance and has been a little stronger the last couple of days. To the extent this continues, this should mean weakness for the equity markets. The 5 year treasury auction was horrific. So much supply hitting the market that it is starting to flatten the yield curve. This supply will just keep coming. Higher yields means more problems. Commodities - oil was obliterated today. If copper and oil continue on this path it will be telling you something also. Early indications of June foreclosures is that they surged massively. I have been warning about this headfake in housing. I believe strongly there is another big wave down for housing prices coming.

Not saying the market is done going up. I said in my post a few days ago, let the market declare that all good news is priced in or if you want to go short average in. I think we are in the last sixty days of the market topping (i could be very wrong and the market will continue to rally) as the government stimulus hitting the markets subside, housing problems start to reemerge, and global activity slows down. The last couple of days we may have just started to see the chinks. The market could very easily continue higher over the next month or two but be watching Asia, the dollar, and commodities.

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