Bad Trading Strategies

Looking for driving forces in this summer's trade has been one of deciding whether to play off the 'bottom is in' strategy or rather on sideways rolling opportunities as they appear. Few think new lows are in the offing so those who love volatility explosion bets can play there.

Views of the world's economic future being saved by developing countries is getting some press, as in today's NYTimes article. China, India, and Brazil are apparently going to drag the rest to safety although there seems to be absolutely little evidence of it. Decoupling again is mentioned, but stopping the reemergence of bad trading strategies is impossible. Oil's recovery to $70 from $33 is provided as proof, but developing country demand rationale drove the price to over $140 with idiots guaranteeing $240. This type of thinking has every commodity trade strategy ultimately resting on the China's consumption of all things consumable. China, unfortunately for all of us, is a pending economic disaster. Totalitarian make-up artists can print economic data from a typewriter in Beijing and the decouplers and commodity folks would believe up is the only power. Unfortunely, when all the developed big dogs are not eating as much there are plenty of leftovers which have to be virtually given away.

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Inflating The Bull

The DJIA, SP500, and NQ100 remain in the confusing zone between price mechanics and value. They are related but can produce price patterns which may not match what various economic performance measures of the general economy. The rally from the March lows are a part of the mechanics of running out of panic selling and the natural betting on prices as a function of comparison shopping.

There is a vague uncomfortable feeling running through the markets which stem from a determination not be fooled again and the ability to identify a low risk opportunity with traction. The thought of enduring the break and missing the rally is almost to much to take, let alone watching the Fed and Treasury insure the wealth of the likes of Goldman and Morgan. The boomers know that this time they cannot simply apply rally lotion to these markets after the thundering losses suffered by investors across the board. The financial health of state and local governments have an appalling smell which can only be compared against a particularly unpleasant historical period. These real dilemmas make the notion of bull market anew difficult to inflate.

Squeezing The Bear

Markets as of this AM continue to squeeze the bear as selling remains light despite intraday sell programs. These are uncomfortable ranges for the most bearish of traders as their warnings for the' worst is yet to come' is being mowed over by cheering bullside perennials. The same technical weaknesses which led to the downside free fall of earlier this year have some of the same elements present in this rally. So for traders, it is alright to be bearish, but don't be stupid. The sell opportunities will be less prevelent, but available. This market, as pointed out in a recent post , as measured by the DJIA, is headed on the half way back trail (10,000), and parts of it may feel like it is going straight up. The jobs picture will be the overpowering force this week and in the months to come. Downdrafts will appear.