The Tale of the Tape


I’ve been very bullish the last three weeks. You have seen me tweet things like “buy em’ when they’re dyin” or “buy the fear” I’ve abused cliches such as “they don’t ring a bell at the bottom”. I’ve strongly recommended that you avoid the media through this period and to run far and fast from those that just regurgitate the obvious negativity . Really,where is the value in that?

Last weekend I suggested that we would rip higher because I thought the planet was leaning the wrong way on euro shorts and treasury longs. We were long $FXE and short $TLT because of this. So far so good.

So what now? In last weekend’s piece I talked about the McClellan folks and how sentiment for stocks was in the dirt. I love extremes and got very long there. This week they show a chart of the Oscillator being short term overbought. Understand that in the past, these overbought reading have led to more overbought conditions, so it doesn’t mean you should sell, just be careful.

“The strong breadth numbers on the NYSE have produced a reading of +164.60 on June 15, 2012.  That is above the +150 level that has been marking an overbought threshold in recent years, and thus it indicates an overbought condition.  But at the same time, it also signals strong upward initiation for this new price uptrend.  It does that because this overbought reading occurs within a complex structure above zero, which is a statement that the bulls are in charge.

So what this means, is that even after last week’s move higher, we can still go higher. But remember, this isn’t your father’s stock market, and even though these indicators can be helpful, we still have macro events that can turn this thing on a dime.

There will be opportunities galore going forward both long and short, but I felt and still feel a very substantial bid underneath this tape. Bad news is good right now. Remember that.  It’s an odd dynamic, but one that can be very profitable.

On a contrarian basis I think the coal stocks will show big returns over the next 90 days. They are too hated and will NOT go out of business. China still burns that black rock and deregulation will probably help matters down the road. Remember, “buy em’ when they’re cryin”

I like coal sector $KOL, energy $XLE, $AAPL and various other longs that have been pulverized.

I don’t care what happens in Europe. It’s out of my control. Yeah I’m the guy that’s up at 4:30 everyday reading everything there is on Europe and China, but I try to use it to my advantage. The world is bigger than me, but if I can catch a little daylight and be right, I can piggy back the world to  great P&L results. When everyone is leaning too hard one way, they only have one way to lean eventually….the other way.

Subscribers have had a great month so far in June. If you would like more info or to request performance email: [email protected]

Good luck next week.

Other Posts of interest

Everybody Gets One

Here’s What Will Happen

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