A SPECIAL LATE NIGHT MESSAGE FROM MERLIN

Your stupid bull market is over, jackass.

-Merlin

Even though TLT is not up, I believe the market is trying to anticipate a rebound in bonds. The hard trade here, without a doubt, is to go long. Agreed?

Having said that, I started to average down in IMMR, buying around 30,000 shares sub $12.85 so far. Upon a further decline, I will add to the position.

In short, this is high risk because we don’t know. Recent history suggests the hard trade is typically the right trade and that is long. Nevertheless, I am still overwhelmingly in cash–but actively buying IMMR.

I almost got sucked in by the bottom feeders, but then I read my blog posts and remembered that TLT ruled the roost, not some jackass interested in catching a rip.

My sole strategy revolves around getting out of IMMR. That’s right, I want to sell it, but at a profit.

Currently, I am down 12% on the position, with a basis around $14.5. I intend to increase the size of the position by 30%, reducing cost to mid $13’s, which will then be liquidated in a timely fashion upon a rally.

In order for this to work, I need to buy blood, not momentum. I need the fat margin clerks to blow out of your positions, zeroing out accounts, sending the stock spiraling lower, in order to accomplish this delicate task.

If I fail to do this, worst case scenario, 25% of my assets slowly drips lower into the Asian calamity to come.

Also, remember that the pornographers in Brazil are protesting with fire bombs, demanding that socialism be reinstated. There are significant headwinds and the SPY is only down 2.5% in June. If the market was down 6% or more, I’d strongly consider buying aggressively. However, we’ve been up for 8 months in a row. This is garden variety so far.

We need more blood before true blood can be discovered.

TLT breaks $109.75 and I will start to buy.

I like this look–big flush out followed by perverted buying.

Also, the IYR is up. All we need is TLT to bounce, then we’re looking at a +200 point day.

I am a buyer here.

UPDATE: I paused my buys until market stabilizes.

Small caps are getting crunched, especially my IMMR position. I will buy more and bring the position back up to 30% of assets when the time is right. For now, I am waiting to see stabilization in TLT. The lower is goes, the more selling in the SPY.

I don’t have any positions that needed tending to, aside from IMMR–as I am 70% cash and have been before the sell off. Any meatloaf throwers in the comments section saying otherwise will be quickly discarded and banned from the league of gentlemen.

Don’t get upset and ponder as to why your stocks are careening lower. This is what liquidation looks like, fat margin clerks smoking cigarettes, selling out positions with reckless abandon.

A fantastic buying opportunity is right around the corner.

I am hearing a better than expected grain season in S. America coupled with a sharp increase in Chinese steel production has led to a spike in shipping rates. How is Chinese steel demand spiking if their economy is in the pits? There are so many cross-currents that make no sense. One thing that is crystal clear is higher shipping rates means a faster path to profitability for shipping companies.

My favorites are FRO, NM, SB, EGLE and DSX.

As for the market, who know’s what it will do today. It looks like a higher open, yet I wouldn’t be surprised if we sold off. I have a list of stock that I want to buy into the margin calls. Let the weak sell out and get flushed out. We will be there to eat their lunches when it happens.

– The People’s Bank of China injected 50 billion yuan ($8.17 billion) into the financial system on Thursday after a cash squeeze pushed money-market rates to record highs, Bloomberg News reported, citing an official at a state-owned bank. The money was supplied to a single lender through short-term liquidity operations and more lenders were in talks with the central bank to obtain financing, the report said, citing Hao Hong, chief China strategist at Bank of Communications Co.

In an effort to save face and avoid national disgrace, the Chinese fraudsters have injected 50 billion yuan into the banking system to help loosen up credit.

As a result, Japanese losses have been stemmed and Asia markets are only going down, as opposed to crashing through the floor boards. The aussies are merely down 0.2%.

Both US and European futures are pointing to an increase of 0.45% at the open of trade.

Japan is lower by 2.2% and the rest of Asia is about to open.

All eyes on credit markets, especially SHIBOR.

1 wk SHIBOR in death mode

How can we buy any dip with charts like that?

UPDATE: CHINA INJECTS 50 BILLION YUAN TO STEM CRISIS.

I went into today’s trade 60% cash. I’ve been in that position since yesterday morning. Even with most of my assets in cash, I lost 3% today. That’s freakin’ ridiculous and I feel like killing someone for that. But then I sit back and think about all of the plebs out there, the less informed, who stepped into today 200% long, then feel a sense of relief that intelligent life still exists and it’s me.

Towards the end of the session, I sold YGE for a 6% loss.  I did so because it can drop another 7% tomorrow. It’s better to take small losses than the largess varietal.

Look, this is very simple, people. It’s either different this time, or not. Well is it?

LISTEN TO ME YOU STUPID BASTARD.

In the past, according to the algos inside the halls of The PPT, stocks bounced quickly and hard when the technicals deteriorated like this. We’ve hit these dour technical levels 8 times over the past year, and 7 times the market bounced for an average return of 3% over a 10 day period. HOWEVER, the data is unconvincing over 1-3 days, with mixed results. I’m objective enough and smart enough to understand that nothing lasts forever, not even POMO.

The Risk Appetite Index has been warning about the danger out there for more than a month. For those of you who are unitiated, the RAI is an index inside of The PPT that tracks credit, worldwide. Have a look.

It’s different this time because Bernanke is going to retire from the Fed and because China is undergoing a credit scare. To alleviate pressures, China will need to cut rates and fast. There is going to be a tradeable low soon–but it isn’t today.

My gut tells me China does a rate cut Sunday night.

SHIBOR

There is a possibility that the Chinese credit crisis to come is about to happen right now. There has been a violent move higher in short term rates in China, something new, something really bad. We all know China has been persona non-grata for most of the bull run, since 2009. However, they could become incredibly relevant if their economy screeches to a halt due to a credit crisis.

However, any continued tightening in credit will be relieved by the Chinese through emergency rate cuts, so there is a catalyst to trade on. That’s why I am not shorting, but opting for cash.

If China goes to hell in a hand basket tonight, longs will lament the day they were born tomorrow.

Let it close without your participation. Raise cash and pick your next fight carefully. This is just beginning.

My buy list is focused around housing, tech and financials.