CAUTION

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You guys know I’m not doing much this week.. The market has been impossible as you know and holding anything more than several hours can feel like buy and hold.

The market will be open tomorrow, but I believe there may be a half day on Friday. Keep in mind that Europe isn’t closed on Thursday and I’m not suggesting bad will happen, but you should be prepared. I don’t know if many of you are holding positions overnight , but if you are have some protection or a hedge on. It makes good sense.

Not much is good right now. Credit spreads are increasing (2008 kind of stuff) as Europe cant get out of its own way. Out treasuries are rallying again (TLT looks higher). The U.S., in my opinion, will be downgraded at some point, and no one will talk me out of a double dip recession.

I’ve looked at 200 charts since the market closed and they all look like shorts, so I stopped. The rub is that when things look the best on the charts it usually means we sell off as stocks look great, but they are probably over extended. The same can happen now, when charts look horrible, we can rally higher. This market has been a bitch, but it is good at climbing the wall of worry.

If you shook me upside down though, I am more bearish than bullish and it really does depend on your time frame.

My point is that I think you should have some protection and I am saying this without knowing what you own. If you are just holding cash, well that’s fine, as cash is probably the greatest organic hedge in the world.

I am long some FAZ (3x short financials) and have been since the chat room call a week and half ago. I am also short FXE (the euro). FAZ was initially a hedge but has evolved into a full position, my Euro short isn’t a hedge, but more a directional bet that Europe cant be fixed. That is a full position for me. Some of you have EUO which is the same as being short FXE.

If you are very bearish on Europe’s outcome you can also be long EPV which gets you short Europe.

If Europe does fail, our banks will go much lower, so all of the above will do very well should that happen. These aren’t day trades for me or even one or two week holds. I made my bed on these names because I have an opinion about how things will resolve. I am willing to take some pain if I am wrong for a week , a month, or longer. I do think that the levee will break at some point and then it will be too late to be short, so protection or a hedge is good to have on now.

I also realize we are oversold and could rally at any point. If that happens I will hold these as core positions and “trade around” them by being long other things.

I haven’t bought the VIX yet, but if I do I will do it with call options and will let you know with an email tomorrow.

These are just a few ideas for you to consider for your own portfolios. These next few months could get rough and a retest of the 1070 level isn’t out of the question. In the meantime we will do our best to trade the tape.

Here are short set ups that look weak if we break lower, these won’t be on the P&L yet, but if you are looking for some trades through the end of the week, keep your eyes on them.