If you’ve managed to consistently make money in this environment, I commend you. But I will not be applying my own funds to the peaks and troughs here, or forward. I am committed to hedging down for a selloff in 2012, and I’m not going to be distracted by the prospects of scalping pennies in the moment.

We are probably nearing oversold territory. However, I have no desire to get long for it, just as I’ve had no desire to get short in the overbought ranges. We have for months consistently defied mean reversion, electing rather to push the boundaries beyond what anyone expected.

This is why I didn’t fully commit to my hedges. We could easily spark a rally hear going to new highs inside of the remainder of December. Dear lord, crude oil itself rebounded almost $30 a barrel inside of a month.

Even when the ranges have worked, they haven’t been what I would call “easily playable.” Oversold ratings do me no good when they occur and 7:30 in the morning. Overbought ratings can’t help me at 9:00 at night.

So instead, I will be casually returning to my old positions. I have no doubt that oil and energy or overvalued here. I don’t hesitate to say the euro is lofty.

I will regain my old positions, while adding more cash than I ever had before. I will remake what I lost.

That’s my plan for the remainder of the year; setting up for the next big move, rather than playing this game of push and give with psycopaths.

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Let’s be honest with ourselves; is this really the “great inflection point?”

The market has been in severe, chronic rally syndrome for months. What are the chances that this exact selloff leads to the massive run lower some of us are anticipating?

Probably not very good, if I had to guess.

So I’m not adding shorts. My positions are getting smashed again by my core long holdings of AEC, CLP, BG, CCJ and physical silver, which are being offset somewhat by smaller ERY and SCO stakes, and of course a very large DRR position. My 20% cash is helping dampen the losses also.

But there’s no reason to expect that it is imperative I totally lock the portfolio down right now. And I wouldn’t advise others race to the end either. The longs are especially dedicated and very stupid. They’ll rush in to buy the dip a few more times.

So hold on, steadily pull money to the sidelines by cashing out of winning positions, and on the big melt ups, add short in a very reserved manner.

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I’ll let you in on a little secret.

Draghi isn’t going to print.

Come on! You didn’t think that tacit little agreement last night was going to fix this, did you? So most of the EU have agreed to bind themselves into a closer union…maybe. So what!? How does oversight fix their present state? They’re going to be overseen going over the edge of a cliff.

The buddy system doesn’t work when you’re in free fall. You just get two bodies instead of one.

Do you know the one thing that needed to be addressed last night that wasn’t addressed at all?

The treaty that established the ECB.

Mario Draghi isn’t stupid, people. Just like Trichet wasn’t stupid. The ECB does not have the authority to print money and become a lender of last resort. Nowhere last night was that power even touched upon.

Why would Draghi print without the legal authority to do so? He can see the one half of Europe that hates the very concept of diluting the euro. He knows damn well that that half of the continent would ride into power on populist anger against him if he defied the treaty that established the ECB.

And he knows that then he, Mario Draghi, would be dragged in front of an international tribunal on charges of Grand Conspiracy against the European Union.

Yeah, I’m sure he’s going to just jump right up and supply the EU with the few trillion they need to keep it together, making a martyr of himself in the process, so that some labor types can have keep cushy pensions. Let me remind you that he’s said very clearly “I don’t have the authority to print.” That’s pretty cut and dry.

You fucking idiots are the ones who keep saying he’s “giving mixed signals” and “hasn’t committed one way or the other”; because you can’t believe that a central banker wouldn’t print.

But really, he hasn’t been giving mixed messages at all, just like Trichet wasn’t giving mixed messages. What’s to misinterpret? Draghi doesn’t want to spend twenty or more years in jail for superseding his authority and defying international law, when Merkel and Sarkozy are long gone and the most hard core of Europe have been swept into power.

The guy’s not an idiot. If it’s going to take until March to get a central authority reigning over Europe, any guesses how long it’s going to take to grant the ECB lender of last resort status?

Sometime in the next few weeks, after the market is on its high horse anticipating massive intervention to save Europe, watch for Mario Draghi to flying sidekick the whole system off the saddle and onto its back.

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Alright, I covered my oil speculation this morning and reversed to shorting a half sized position in oil, via SCO, this afternoon. I also added ERY and added to DRR.

The truth is, I never bought the rally and cursed it regularly, even after capitulating recently. I’m sure that now that I’m returning to my old trade, the market will run higher by 1,000 S&P points, but I don’t care.

The global economy is just too terrible to go long. And the issues with oil…don’t get me started again. Hearing old man Pickens repeat some of everything I’ve been saying for months – huge supply, a middle east that isn’t in a position to lower output, terrible demand, weaker euro prospects, etc. – gave me a second wind.

But, I’m not going to be as brash as I was before. Firstly, I’m raising cash…lots of it. I’ve sold off parts of my AEC, CLP, BG, and CCJ positions (I axed all of AWK a while back), and I’ve got about 20% so far. And I’ll go as high as 40% before hedges.

Second, I’m not fully invested in the inverse stuff yet. There’s every reason to think the holidays will deliver at least one more Christmas run. Why not? The case for a bull market was never strong, but we’ve had one anyway.

So I’m saving room to buy inverse energy and euro products later. I either add at lower prices, or after I receive confirmation. If we only get small dips, I’ll take profits opportunistically.

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Let’s just get this over with

___________________________________________________________________________________

At one hour and fifteen minutes before the close, a man working for the U.S. Treasury by the name of “Michael” will go long Italian treasuries and then start making calls to spread word of an impending bailout from the IMF which he has just heard of from his “in” at the body.

What he will fail to mention is that his “in” is a guy named Karl, who works as a janitor cleaning toilettes in one of the satellite offices the IMF rents space in, who works a second job as a male waiter at a gay bar in Paris, whom “Mike” once met while “just being curious.”

He will spread these rumors through his favored outlet of MBA graduates from Ivy League universities working on the trading floors of major brokerage firms and banking groups, who are under the impression that making it in the real world is about connections and “pull” rather than hard work/prudence/talent.

The MBA graduates will faithfully report this rumor to all of their associates and any other passerby’s, despite an inspection of it lasting more than a second easily revealing the rumor to be totally fabricated, because failure to do so would be akin to admitting they don’t have any edge or special placement, effectively admitting that their six year degree can be easily replicated by most experiences of a social networking website.

The size of the bailout rumor will be $600 billion, because that was the size of QE2, a number most market participants associate with “good feelings,” and higher prices, not dissimilar to the dogs of Pavlov.

It will be dismissed within 6 minutes after its release to the markets. However, by one hour before the close, all the indices will have fully recovered and will not resume trading where they were pre-rumor, because Technical Analysts believing that the move was an indication of a “breakout” from that “wedge pattern” (any sideways chopping movement of any size for any period of time) they had been staring at all afternoon while eating pop tarts, will move in to buy giving momentum to the trade higher.

For the remaining hour of trading, short sellers will be crushed, resulting in positive outcomes for all parties involved (rumor mongers, idiot twenty year olds, and facilitating momentum chasers) which will pave the way for the rumor to be repeated again within 72 hours.

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Markets, commodities, and ironically the euro itself are all gapping higher on an announcement this morning that the ECB elected to cut rates.

It’s so ludicrous; so preposterous; so outrageous, I just can’t help but throw back in my chair and laugh convivially.

The ECB has lowered the amount of money central banks need to repay to borrow cash, which is as a mechanism goes, going to loosen the amount of control the ECB has over the supply of euros. It’s also going to give banks across Europe more room to bid up what remain of the euro denominated bonds that are viewed as safe investments. That’ll lower any incentive for foreigners to hold onto euros, unless they’re looking to get a piece of this awesome market for Spanish debt. And the act is really the last thing the ECB can do before warming up the printing press.

The rate cut should have people fleeing the euro, cratering it, because it smacks of desperation and is going to directly hurt the value of the currency, but instead they get a massive surge, because why?

Don’t tell me that survival tall tale. At 1.34, the euro is being given every benefit of the doubt.

(As of publishing this, that fast move higher has already been sold. That’s where we are now; huge spikes that get reversed within minutes. Whatever, I’ll post this anyways. I’m not going to miss this year at all.)

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