Someone Please Explain…

Can someone please explain to me the China collapse theory?

China has a severely undervalued currency, an established and powerful manufacturing base and a hoard of savings they’ve accumulated over the years.

America has a severely overvalued currency, a terrible manufacturing base and no savings.

How can they both crash? They can’t.

China can allow its currency to appreciate, can switch its manufacturing base to produce what its citizens need as quickly as demand falls from its exports targets and can liquidate their savings to finance any purchases they could possibly need.

Holy shit, this market is maniacal, crazy, a seesaw with 2 large men flip flopping back and forth. The only other time I remember it going this nutzo was I in ’08, I think September. Made 10% that day.

Didn’t make 10% today. Made some moves, though I don’t care to share them with you right now. Go look at my twitter. @chivotrader

Don’t get LOLitis on me now.

Yesterday I authored a couple of posts throughout the day, urging people to remain in control, objectively assess the market, and sell longs. The day prior I called the market going higher, in a rather veiled way though so as not to reveal The PPT‘s magnificence. Yesterday I hopped into TZA/SKF and initiated three other shorts in EPM, FRPT and JNS. Today, those positions got the clawhammer, resulting in overnight, unrealized gains of 4%, 4.5% and 8%. I even added to my short of EPM into strength.  TZA & SKF were better, obviously being levered, and I took 1/3 profits in each, of 10% and 5.5%. Do you know why I added to my shorts, rather than covering for losses into today’s strength? Because I knew we would reverse, as destiny would have it, since I predicted it in my blog yesterday. This all after refusing to short or sell the majority of longs into the meltdown just last week.

DO YOU NOT SEE WHAT’S GOING ON HERE?

Sure, I’m trapped in some longs from the beginning of the month, having been all excited and shit to hop back into the markets after a summer of traveling and overtrading (LOLitis) myself into some holes. I’m working my way out of these horrible positions, though. More importantly, my more recent action has been spot on, as the Brits would say. I’m hitting my stride again, just a couple weeks after reopening the book.

Into today’s massacre, I was fairly balanced. As stated, I shorted more into strength and thus at the end of the day actually turned a small profit.

51% cash, 17% short, 32% long

Small caps are down, banks are down and commodities are down.

Guess what comes next?

While you were picking your nose, the stock market melted over 50% from its highs. You sat there in your chair, in ignorance of my mid-day post warning to stay in control of your emotions. You cruised down Happy Blvd., forgetting what it was like to fear of economic collapse just last week. You were dreaming of gorillas and coke and you stuck that pinky finger way up your nose in search of a glorious booger. But just as you reached gold (a golden booger), the real market hopped out of incognito, holding a video camera and punched you in your fucking nose, making it bleed a river of punishment while filming the entire exchange.

That’s what you get, n00bs!

To be honest, it caught me a little off guard. I was assuming we had a full-on trend day, and would be closing near the highs. I sold out of MT, FFIV for wins and tossed a loser aside, SCHN. I sold a portion of SLB for a win. I raised my cash to 60% prior to the meltdown. But the market melted before I could fully add my short exposure. I got off starters in EPM, JNS and FRPT, 2% each. And by the end of the day, sans a quick rubber band snap back, I got starters in TZA/SKF, 20% and 33% respectively. I’ll detail my shorts tomorrow, with charts and data and shit like that.

I sit at 45% cash, 40% long, 15% short.

If the market opens up tomorrow, expect a reversal. I think we’re headed back towards 1120, to do battle again, at a level where my arch nemesis Chess and good friend NWine have made accurate posts about.

I know what you n00bs are doing right now: salivating over higher equity prices, as if they’re guaranteed to come. But as you switch from bull to bear as quickly as the market, remember that Chivo is a man, in control of his emotions. The market does not give a fuck about a 300 point up day, as it will gladly rip your head off, -500 the next. Don’t sashay from elation to fear and back to elation like a fucking woman, acting all illogical and shit.

I’m selling longs into this rally, now at 55% cash. At the same time, I understand how most managers feel about missing out on such a rally, so I will not short until the time is right. Until the time is EXACTLY RIGHT, in fact. It’s also end of quarter, so be prepared to see this rally go further than anyone expects.

Sell here, short 1200-1220 and higher.