The Market Has Crossed Into Uncharted and Turbulent Waters-All Hands On Deck!

Things have gone from real bad, to even worse. You may remember the last few days, Bear Sterns vehemently denying rumors of a liquidity problem, and today.....

This is all just part of the problem, the total and complete lack of transparency and the art of subterfuge which has been elevated in recent weeks to a Financial PLAN that has been employed from Major banks to the Fed to the puppets at CNBC. Nobody wants to put money up for equities because there is no trust in anything that is out there and when the entire world doubts the US Financial system, especially the Federal Reserve, then money evaporates from the market making matters worse. I'm sure the Fed understands this, which means that the current alternative is better than full disclosure-and this is a scary prospect.


A few people have emailed me wanting to know what I'm involved in, so I figured I'd just put my positions out on the blog. All positions, except for DUG, are short. DUG is a long position, but it is a double inverse short, meaning, when Oil prices fall, the value of my DUG position appreciates-so it is a short in effect, but you buy it like a long which has some advantages (at least psychologically for some). I bought DUG yesterday toward the close and then added more today late in the morning. For my TA Class, this is the concept of "averaging up" winning positions rather than averaging down loosing positions. I added to DUG because it is in a nice little triangle consolidation on a 1-min chart (today from 10am-11am) and it should break to the upside. Should the triangle fail, I'm still happy with the overall character of the position and most probably will hold, but if it fails, it will set up a fast move to the downside (failure would be below $38.75, which may happen before I get to post this).

My other short positions (most of which I've held for several weeks-I did close and thin out a few and got back into all except HIG) are: GNK, MDR, NOV, PAC, SPSX, and PRU. I did buy EOG 2 days ago and sold yesterday at a very nice profit, although I did miss a few extra points to the upside. EOG was a trade posted on the Member's site, along with several others (see an excerpt from the Member's site posted yesterday--below).

I remain very skeptical of the Fed's ability (along with all of the other Central banks that have been recruited) to provide anything more than temporary relief via liquidity using all of these recent inventions-all of which skirt around rules the Fed must follow. In other words, the Fed is doing stuff against its rules-like buying mortgage debt outright, instead they've set up a temporary, but indefinite, way of accepting the same via their Auction Rate Facility and their new scheme announced this week (again, see sample Member's post below or just follow the link). Make no mistake about it, the Fed's actions are unprecedented and give us a window into just how bad things really are. The Fed looks "panicky" and they're spooking the market, not to mention adding extreme volatility that is costing investors/traders $BILLION$ in lost capital. This is one of the rare occasions when following your stop-loss rules, can be counterproductive and costly.

If you must be involved, you must be diligent and either have stops extremely wide or extremely small. You must be willing to trade the short side or use the inverse ETFs like DUG or SKF. This is an extremely volatile and unprecedented market, it's hard to make money and keep it because the swings are so extremely wild. Keep your eye on the horizon, not on the turbulent waves as far as the "big picture" goes. When this market absorbs the extent of the Fed's actions and realizes that it won't suffice, there will be panic the likes of which most of us have never experienced, in my humblest of opinions. Even a Fed president said, the Fed can provide liquidity, but it can't fix the underlying problem. In fact, the Fed's actions, while providing a temporary sense of confidence, are actually eroding the foundations of our Financial system and in the process crossing some very taboo lines, which probably should not have been crossed, at least not without airing it more publicly.

Any way, that's it for now. Email me with any comments, suggestions or concerns and I'll try to respond in a timely manner-or just get involved on the Tagboard to the right. Check out our Member's services, you might just find it to be profitable and give TeleChart/Blocks a spin-you will find that useful. Enjoy your weekend!