Marketview: Bear Raid

• Posted by DynamicHedge
• on November 10th, 2012

Well congratulations, here we are again.  In the midst of another crisis in Europe (Spanish bailout and Greek funding) and the f*%&al cliff.  Add recession talk to the mix and we’re staring down the same barrel of the same gun that we were in June 2010, September 2011, and May 2012.  Destined yet again to be shaken to our core with nightmares of holding underwater positions below 666.  Where did that get us?  Each time it looked like certain death and yet here we are.

There are lessons to be learned over the past couple years.  We’re not dealing with a set of circumstances where the primary bad actors are 22-year-old Las Vegas condo flippers.  These are politicians and central bankers, and while they’re only marginally more sophisticated, the stakes are much higher and they know it.  Plus they have the option to extend and pretend as long as they like.  This selloff feels more like a bear raid, and less like the beginning of a real crisis.  In a real crisis no one will listen to the naysayers.  Right now, everyone is listening a little too closely.  In other words, the price is the news.

This week we saw basic materials, industrials, and consumer staples hold up relatively well.  Utilities, financials and the ever-cursed tech sector got sold hard.  Utilities in particular have been bludgeoned lately.  As if enough time has not been spent dissecting the $AAPL selloff, but watch it closely as remains an important belweather.  Watch Spanish yields as Rajoy jockeys on a bailout timeline.  Also, please do yourself a solid and disassociate yourself with anyone who has publicly claimed that the all-time high is in $AAPL.  They might be right, but they’re also probably the most annoying person you know.

Our indicators are still pointing the same way they have been since October 13: lower.  Let others fish for the bottom.  Wait for the market to become constructive and healthy again, who knows how long this bear raid will last.  Next week is options expiration and FOMC minutes.  We feel that the volatility will continue and this is two-way traders market.  The $VIX remains suspiciously low.  Either it breaks out much higher and we test 1360 area or we’ve completed the downside price discovery process.

Winners: $QCOM, $TXN, $DELL, $NWSA, $PEP, $WMT, $COST, $CAT

Losers: $MS, $GS, $BAC, $JPM, $AAPL, $AEP, $SO, $INTC

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