Thursday, February 4, 2010

Investor Confusion

If you watched CNBC today it was a mass of confusion. No one knew exactly what was going on. Was it jobless claims, was it Washington, was it Europe? Most were caught off guard.

You know when your watching a movie and a rope is holding something important, the camera lets the audience know that it is slowly unraveling even as the bystanders in the movie have no clue. You as a viewer see the impending doom but there is no way to tell people in the movie. So it is right now. It seems to me the threads have started to unravel. Some more popped today.

Jobless claims came in very poor today. The blog credit writedowns said everything that needed to be said about it. You can read it here.

That was bad. I think the major story though is still Europe. Europe is starting to fall apart and the contagion aspects of that are massive. Moving forward I have thought about changing my day to where it starts at 3:00 a.m., about the time many European markets open. Unfortunately, I think much of the trading action over the next few weeks is moving towards Europe and that will determine in large part what is going on in the United States. As a result, unless you are trading futures, you will be stuck with action like today where the market gaps down.

In general, I think you use every opportunity of strength to short. I shorted Tuesday, Wednesday, and was selling at the open today. It has been along time since I moved this aggressively. Any bounce between 1070 and 1080 I think you short also. Is there a possibility we have another run at 1100? Yes but I think probabilistically unlikely at this point.

One thing that was so irritating on the way up from the March lows for someone who was bearish is the market never seemed to give you a chance to get out of your short positions. I feel like that will be case in many respects for the longs as well. Markets go down alot faster than they go up. We may have started something that will be mind blurringly fast at least initially. It has already been fast.

Who knows but in general I think we will head into the 900s, they will solve the initial Europe problems, we will get a bounce for a few weeks to a few months, and than bam. Down we will go on the United Kingdom, California, maybe Japan. There are massive debt and housing bubbles everywhere.

I have been waiting for this for a long time but in alot of ways I sure hope I am wrong. What I see is not pretty and will cause alot of suffering for alot of people.

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