The backdrop was set this week with Dell earnings which didn’t impress anybody, and a $5 billion loss by AIG. Hell, even Warren Buffett said that the party for insurance companies was over. The index of regional business activity had its weakest showing in more than six years and oil prices tagged $103. I could technically make a case for oil hitting $120 as it could measure to that level. A hedge fund folded, and consumers are as negative as they have been in five years. UBS slapped the market silly when they said that sub prime losses could exceed $600 billion before the pain stops. President Bush and Ben Bernanke both said this week that we are slowing but will avoid a recession. That reassuring thought is brought to you by the same fellas that said housing would be ok. Stocks closed with there fourth strait month of declines and the dollar is at historic lows and let’s not forget food inflation.
I have painted this pathetic picture of our state of the market because I am actually bullish. Can we or will we test the January lows? It is so talked about, that it probably can’t help from becoming a self fulfilling prophecy. I am watching the VIX for a potential turn, keep in mind that in late January the VIX soared to 37, on Friday it moved above 26. Fear levels are on the rise but that gives me cause to bullish. This week I will be very light on my toes and I do have a bias to the short side even though we are getting closer to some type of resolution. The question – is that a light at the end of the tunnel or an oncoming train?
This week we have a lot of data with the all powerful February jobs number on Friday. That piece of data has become the flavor of the month. I remember back in the 80’s we only watched the money supply numbers. Funny how things change.
In the spirit of being very short term cautious I have found some short set ups that I will be watching closely this week. Good luck folks!!!
LTD– I would short under $14.90
EBAY-I would short under $25.63
MRK-I would short under $44.20