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Skip Witch?


Remember the days of the slithery sideways summer markets? A thing of the past, most likely...


Raven hair and ruby lips
sparks fly from her finger tips
Echoed voices in the night
she's a restless spirit on an endless flight

(The Eagles)

It's been a wild ride of late and in the interest of covering our bases--and due in no small part to the fumes in my tank--I'm gonna invoke my literary license and share this fare in a speakeasy format. Hey, it's Freaky, it's Friday, it's absolute mayhem out there. We can do this.

As Minyans know, I braved the crimson winds late Tuesday and pulled out the bull costume for the first time in quite a while. The meat of my exposure was nestled in metals and energy (the drillers), with a dabble in Centex to top off the speculative effort. While the tea leaves didn't support it at the time, I defined my risk (XAU 110) and made the bet.

In the "it's better to be lucky than smart" department, we caught a two-day sparkler that ripped the tape right back to the daddy's nemesis (S&P 1260, the 200-day moving average). In addition, and while many of my mainstay stochastics are still uber-oversold, other proxies, including the brokers, spiked higher to fresh resistance (XBD 204). As I've always been one to leave the party while I'm still having fun, I humbly removed the bull costume late yesterday as a function of a more balanced risk profile.

Premature Evacuation? Perhaps--but with expiration likely exacerbating volatility, resistance overhead and the VXO down a stunning 25% in a single session, I chose to balance my book. How? Through autumn piggy puts, mostly, in the form of JP Morgan (massive gold and derivative exposure) and a bit of Goldman (I think history will prove that Paulson made a savvy sale). It's not huge risk--again, I'm conscious that we're oversold--but if we're to see Apocalypse now, I gotta think they'll bear the brunt. If not, I'm content betting that my metals and energy will outperform the smoky financials on a relative basis.

Minyan Mailbag


You talk about the sharpest rallies occurring in the context of a bear market and noted that select stocks are up 6-8%. I am wondering if you are speaking about metal stocks when you are pointing out the size of the gains. Because I take issue with what you are saying about the sharp rallies. I agree that is the case; that is not up for debate. But I would be careful describing the gold stock action as such given the small and in a lot of cases, micro-cap nature of them. This is just how they move. Being up 6% has become quite commonplace and hasn't been a sign of running too far when they are in buy mode. So, while the rally is nice, they could easily tack on this much again over the next couple days, and most definitely once gold has taken out the downtrend line (which I have to tell you has been THE technical metric I have used for 3 yrs to trade these things profitably).

Good luck, Minyan Jason

Yo Jay, Yo Jay, check this out...

While many of the metal proxies I watch (and trade) were indeed up that much, they weren't alone. The energy plays, for instance, were up that much or more. And while I agree that we must view these moves on a relative basis (they've been jack hammered), it would be myopic to completely discount the possibility that there's a much bigger downside picture in play. Pepe Depew touched on this yesterday in his excellent "5 Things" column and if you haven't read it, please do so. It's pretty sharp perspective.

You don't have to sell me on the virtues of the metals but there is risk to that--or any--asset class. It's called the Phantom and if traders get spooked by his shadow, as I feel they have, absolute pain will trump relative performance. I continue to feel we'll toggle rather than tip--which was one of the catalysts for my bull costume--but I'm more comfortable with some short side exposure just in case. Trust me, I prefer to see a rip roaring rally along with the rest of you as the critters will fare quite well in a new (cough) economic boom. Alas, I've found that hope is not a viable investment vehicle and prudence is indeed dear.

Some other, tertiary, completely Random Thoughts...

  • According to Bloomberg, China's central bank raised the required reserve ratio by 0.5 bps to 8%, effective July 5, in an effort to curb an investment boom which is creating excess manufacturing capacity. Keep an eye on this as it coincided with the morning give back in gold.

  • Remember the days of the slithery sideways summer markets? A thing of the past, most likely, as the synchronized global swim will continue to surf the waves of change. I mean, honestly, Mexico was up 7% yesterday? ¡Diga a Sammy que haya expirado su pasaporte!

  • How about this 2004 vuja de courtesy of Minyan Dominick?

  • Many thanks to ye faithful for helping a fellow Minyan with his Saab story. It got picked up as a function of the traffic and he wanted me to thank those who helped me achieve his dream.

  • Finally, Buzz 2.0 will roll out this weekend and it will be 100% web based. Those Minyans who have the downloaded applet will be prompted to the snazzy new tool on Monday so worry not. And for those Minyans who have been so very helpful with their tips and quips on the Buzz tool, I think you'll be very pleased when you see what we've done. And the dream just keeps on building.

  • Fare ye well, my friends, and let's end this week with a smile on our puss and some jingle in our jeans!


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position in metals, energy, jpm, gs
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