Thursday, June 7, 2012

Prices Moving Fast, While Our Minds Move Slow


 Last night showed that the risks are just as skewed to the upside as they are to the downside; we saw a 30 points upswing on basically rhetoric from a few central bankers on stimulus possibilities, and ECB president Draghi speaking of the EU's commitment to addressing the crisis.  Talks of the Spanish rescue were discussed.
The market will now be closely examining Thursday's speech by Bernanke before congress.

When financial market flows don't make sense, I like to look back to the following graphic and try to identify the sources of information flow into the two categories.


This current 'rip your face off' rally was somewhat expected by some bloggers, even bearish ones (http://slopeofhope.com/2012/06/rip-the-face-off-rally.html) - and this is the key reason why a market in the current Bernanke put is so hard to short - even if economic data is weak, traders will start bidding up inflationary assets classes like gold past few days, and silver last night, and combined with the urgency that is being earnestly applied by leaders worldwide, even europe may get their act together - which would be another catalyst for a 30+ point rally.

Another very good article about what happens during bear markets vs. simple corrections, and the last 2011 selloff saw p/e's fall to 10.2.  The same p/e would be a target low of sp500 1135.
Clearly we are more likely in a correction than a bearmarket; and with certain earnings coming into play, we got many opportunities for a year end, election fueled rally.

Who knows where we go from here, volatility is guaranteed.

My current holdings are ABG, AG, GDX, QAU for gold exposure, estx50 2018 call options for europe recovery, bhp and wpl for asx cyclicals on the china stimulus expectation, HPQ MERU, SODA for value plays, BPTY and SBT for expecting changes in the U.S regulations for online gaming, and my speculative holdings cvn, cfu, bcn.

I'll add some beta names if the current rally can be sustained.