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March 2, 2009

Thud

This wrap is gonna be quick. I delayed my return home for a day, and I've got things to get to this evening. Today's session was nasty, as expected, and the S&P 500 went out on the session low. The SPX now fallen in 10 of the last 13 days for a total drop of 20%, and we have a stretched reading for advance-decline volume:

market indicator

The banks, which foreshadowed the current market weakness by continuing to drop to new lows into 2009, are now hanging above the February low.

banking index chart

It may be too soon to judge, but one would think the banks would have to participate if the general market were to continue lower. Combine all these factors, and we may be in for at least a near-term relief rally.

stock index chart

However, I do not think the bottom of the current move will be printed until we get panic volume along with an extreme reading in the total put/call ratio. Therefore, I'm hanging short for a while. I did bump up my Sprint long a bit since the shares have been holding above their breakout level during the slaughter. The play will partially hedge my short line (theoretically), and if the shares' relative strength is any indication, they should do quite well once we set a bottom and start the next significant rally.

Mining shares participated in the sell-off, and gold settled down to close directly on the downtrend line.

gold chart

On one hand, I'd like to see lower prices in mining shares so I can load up. On the other, any further weakness for gold on a closing basis forces me out of positions. I have a feeling we won't get our way on both issues.

At the risk of disillusioning legions of fans (tongue in cheek), I will confess that the Docfolio was actually down about a half percent today. How could that have happened, one may ask? Well, naturally, I will tell you. I am long crude oil. {Pause. Wait for crowd to cease murmuring with tragic undertone}. Yes, and as you all know, crude got walloped for 10%. Now, my oil position itself was not large enough to erase my gains from the short side, but remember I am also long silver, as well as a few equities: SLW, RJA, PWE, and Sprint. The cumulative change of all these positions was enough to throw me into the red. Trading is a difficult job.

 

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