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Guest Post: Time To Cover Some Shorts?

Tyler Durden's picture




 

From Peter Tchir of TF Market Advisors

Time To Cover Some Shorts?

Yesterday morning, the market still felt extremely complacent. Stocks were down 15 points, and yet it seemed like most people were waiting for the "inevitable" bounce.  Whether it was going to be something out of the US government, or the EU, or support from the 200 DMA, everyone still seemed more afraid of a bounce than of continued sell-off.  By the end of the day, some of that complacency was finally taken out of the market.  It still feels that the market is a bit too long and hasn't fully digested the downturn in the data, so I remain biased to the short side, but did cut some yesterday into the close and have been covering more this morning as European credit has (briefly) stabilized.

I will continue to watch European credit closely.  It seems like the politicians are starting to talk up the last bailout plan and how they could increase it.  This is about par for the course, since 2 weeks after the latest deal was announced, most of the market gains, and almost all of the good feelings inspired by it, have been given back. It would take a material change in Europe for me to switch out of my negative bias. 

We are probably due for some positive surprises from the data, and although I don't think the weakness is fully reflected in the market, we could bounce a little more.

If either Europe or the data really disappoint, I will rush to reload my shorts, otherwise I will likely gradually reset shorts into any rally.  I am shifting my focus to short more HY than stocks.  It seems like high yield is still priced to the offer side and did not fully capitulate into bid hitting mode.  I beleive that a 1-2% down move in stocks would create a similar move in junk as investors would hit fading bids.  On the other hand, the fear was so palpable at the end of the day, that if stocks go up 1-2%, junk may only move a 1/2% as the main move will be bids firming up to where people have bonds marked, rather than a real liftathon.

 

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Wed, 08/03/2011 - 07:55 | 1519928 mayhem_korner
mayhem_korner's picture

I will rush to reload my shorts

Beg pardon?

Wed, 08/03/2011 - 08:44 | 1520068 Dan Watie
Dan Watie's picture

.

 

Never re-holster an unloaded short.

Wed, 08/03/2011 - 07:56 | 1519930 Snidley Whipsnae
Snidley Whipsnae's picture

Buy some physical PMs... sleep well...

Wed, 08/03/2011 - 08:22 | 1520009 jus_lite_reading
jus_lite_reading's picture

I sleep soundly at night knowing that I am all in gold and silver. 

GOLD NOW AT $1671 and rising!!!!!!

Now ask me if I care which way the markets go... the answer is NO!! GOLD GOLD GOLD is the answer from now until the end of this global economy!!!! PARTY ON!!!! 

I want to see gold at $1776 this month!! Symbolic yet satisfying

Wed, 08/03/2011 - 08:48 | 1520069 Dan Watie
Dan Watie's picture

.

 

Gold RUSH up ahead!

Wed, 08/03/2011 - 07:58 | 1519935 66Sexy
66Sexy's picture

uh oh. tme to get REALLY bearish. ZH sentiment change.

Wed, 08/03/2011 - 07:58 | 1519937 oobrien
oobrien's picture

Look!  I'm watching CNBC.

And those guys are telling me it's just a soft patch.

So put that in your pipes and smoke it.

Becky's on vacation.  But her replacement has a nice set of tits.

http://geraldcelente.proboards.com

Wed, 08/03/2011 - 08:18 | 1519999 smlbizman
smlbizman's picture

the problems with the tit girl is as soon as she opens her mouth she instanly gets uglier.....that is why the spanish babes always stay hot 'cause i don't have a clue as to what they're saying, but if i did.....

Wed, 08/03/2011 - 07:58 | 1519939 Ghordius
Ghordius's picture

I hope he is using HIS money to short European Credit. I fear he is using Other People's Money with a 100x multiplier, courtesy of some bank stuffed by Ben.

Wed, 08/03/2011 - 09:11 | 1520122 Salamanda
Salamanda's picture

You know Ghordius, I was thinking the exact same thing.

I also couldn't help but think to myself as I was reading it: "What a parasite!"... then remembered I used to be one of these guys 15 years ago... now that's a reality check for you!

Wed, 08/03/2011 - 07:59 | 1519941 bania
bania's picture

***BANIA'S JOKE OF THE DAY***

 

Q: what's the difference between a bond and bond trader?

A: a bond matures

Wed, 08/03/2011 - 10:07 | 1520357 Subprime JD
Subprime JD's picture

Good article. On a ultra near term basis the market is oversold. The last time we had a uninterupted decline like this was October 2008 and today is not fall of 2008. In my opinion, any recession that comes will be lighter than 2008-2009 but the cumulative pain will be worse as pensions and debt were assuming 3% growth rates into perpetuity.

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