Wednesday, June 28, 2006

Fear and trepidation

... and that's how this market feels despite finishing near the highs of the day. Volume was light and market internals were mildly positive. A consensus of a housing led slow-down or recession seems to be forming (see here). Whether that has been priced into the market or not, I have no idea. $VIX closed at 15.8 not far from where we checked last time. The put/call ratio ($PPC) shows a lot of fear so something may be afoot.

I closed out my short position in Countrywide Financials (CFC) todat at $37.30 for a 4.4% net gain. There was no compelling fundamental reason as far as I'm concerned: the insiders are still selling big chunks of stocks. It's just that CFC has been quite a sloth recently, and if I believe housing weakness will continue, which I do, there are greener pastures to feed on.

In PMs, it sure seemed that everybody was looking at the down trend break out which I also commented on. As always, Mr. Market never obliges the majority. I'm watching the pull back of the last two days with alarm. If we get another leg down in the general indices, the PMs can easily be dragged down as well. Of course, one can also look at it from the perspective of a reinvigorated dollar powered by interest rate differentials. It's futile to speculate how things will turn out at this point. Just last Friday I allocated a modest 5% to two new PM positions because I saw the possibility that the PMs and the general market may part ways. Given the recent PM actions however, I'll likely exit those positions upon further weakness. I'm not that concerned with being whipsawed as capital preservation takes precedence here. This is not investment advice, please do your own due dilligence. Good luck and be safe!