Forget about the bull market. Just forget about it. We are officially on the “other side of the mountain”, with steep losses in all of the global growth names. Before we can say “the uptrend is intact,” there is a lot of work to be done.
So, for the sakes of keeping things simple, I am assuming the primary trend is lower, with an emphasis on deflation. Regardless of where you stand on the ever cumbersome inflation versus deflation debate, one thing is abundantly clear: the market fears “the Big D” way more than a little i. This is why treasuries are rallying and commodity stocks are being poleaxed. The worst case scenario, for the market architects, is to see their fraud unveiled, vis a vis sovereign debt defaults.
It’s very easy to paper over some bullshit mortgages. But, it’s not so easy to ignore the entire EU collapsing before our eyes. Who do you think loaned out all of the money to the PiiGS?
Answer: French and German banks, who are all intertwined with U.S. banks. The whole thing is connected.
For the foreseeable future, I suggest that you monitor the bond marker very closely. On The PPT, I update fellow gentlemen on the CDS market. And, I put together a Risk Appetite Index (RAI), which was designed for a market just like this. I want to know, before retail, where there is stress and I want to know right away. Here is a screen shot of the RAI:
(NOTE: The RAI is comprised by using a multitude of publicly traded bond funds, both domestic and foreign. I’ve compared this to the Markit CDX index and it definitely compares quite well.)
I will play this market accordingly:
Assume the primary trend is lower.
Do not press shorts, when extreme OVERSOLD conditions persist. Central Banks tend to do outlandish shit when markets crap out.
Play the upside, in a measured and fast way, even if that means going long 2-3x ETF’s for the sake of expediency.
Stay hedged, at all times, even if that means eating monstrous losses. Nothing is guaranteed, including the apocalypse.
Utilize The PPT‘s algorithms to help identify specific overbought/sold ranges.
Top picks: Short MET, AFL
A Flashback to the bear market days of 2008. Note the orange tone to the site.
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