Tuesday, July 06, 2010

Dump the Whopper

The good news is we got an explosive up open on Tuesday. The bad news is that this may well be just another one day wonder, resolving the extremely oversold nature of most markets and setting up a series of further nasty plunges.
I may be old but I'm slowly learning the new paradigm . . sell all gap up opens. This is especially true when we get whoppers NYAD pops like Tuesday where the opening value of the NYAD was 18.20. Please . . a little tough love here . . if you don't realize the extreme inflation of such a value then you need to study the markets a little more. The odds of this number be sustained for even a few minutes is close to zero. And, as confirmed by the end of the day results, the NYAD had fallen to 1.08, an essentially neutral value.
I picked up a number of longs on Friday with the idea that most of the big traders would be selling risk at Friday's close over the long weekend. Of course then I fretted over the weekend that Tuesday would be another doozey down day and I'd be a bit poorer . . and Monday night's down futures didn't improve my mood.
But lo and behold, Tuesday gapped up big and I couldn't sell everything fast enough, finally getting 100% cash 30 minutes in. I left a few bucks of opportunity cost on the table with my long SSO calls and BAC, having bailed on them a smidgen too early, but dumping WMT at 49.21 was a gift.
Sometimes you just get lucky . . . and that's exactly what it was. I've got no illusions about being a forecasting wizard . . the whole scene could have gone the other way in a heartbeat . . don't kid yourself . . this is an ugly and scary trading environment.
Oh yeah . . TLT is back in the lead again.

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