Backed Off

I remain of the belief that the market will put in a top by early May. However, I used Friday's and yesterday's dip to take down my net short exposure. The reason being that we are still in the seasonally strong part of the year and I don't want to be net short for the turn of the month.

Originally, I thought that the government would start selling shares of Citigroup this week and that we would see a heavy issuance calendar. I believed that the combination of extreme sentiment and heavy issuance would trump the positive seasonality. However, the government has not started selling shares of Citigroup and the issuance calendar has been light. I will wait until early May before looking at moving to a net short position again.

Apologies for the lack of posts but I am on the road.


Anonymous said...

Good morning, Thanks for all your posting.I would like to know any reason why you dont take long position in this market. Yesterday I saw $RUT and $NDX breakout to new highs.

Tsachy Mishal said...

There are too many extremes registering that have previously led to large selloffs.

PJ said...

The more I think about this market the more I think the authorities have been supporting stocks the last few weeks out of fear of a European banking crisis repeating the Lehman scenario as a result of PIIGS losses. The European banks are facing hundreds of billions of losses on sovereign debt, and they were insolvent to begin with. Any kind of bank run would precipitate a contagion that the governments could not control. They are trying desperately to hold things together behind the scenes, while presenting a front of confidence to the public, and supporting stock prices to give complacency some credibility.

Maybe the government is holding off its Citigroup sale for fear of pressuring the market.

It seems to me that the market is beginning to run low on private buyers.

I think the market could continue its rise a few more weeks, but it could also blow up and drop 30% in short order. I think I have to stick with my shorts, look for a good entry for remaining cash, and endure a few more weeks of possible upward movement. I doubt it will be long now before some sort of decline begins.