Thursday, June 22, 2006

Potpourri, June 22, 2006

Somehow, the market just feels lethargic to me, which is contagious in a way. On Monday, I pointed out that the S&P was in a down channel and the key question was that whether we will have a 5-wave impulsive wave down or a 3-wave correction. The passage of time has not brought closure to that question. Yesterday’s rally on average volume brought us right to the upper rail of the channel only to drop back on even lighter volume today. I tend not to put any weight on the leading indicator or the jobless claim -- the market cares about such things when it chooses to. I closed out my last IWM puts yesterday @ $11.30. I’m currently sitting on 25% cash in my AM accounts.

As far as my beloved PM sector is concerned, I noted last Tuesday that both my downside targets in gold and the HUI ($575 for gold and 280 for HUI) were reached. I managed to pick up some CEF, but not the gold miners I was interested in. Being away for two days last week really put a damper on my execution. Currently, many gold miners are sitting near the upper rail of the down channel just as the S&P, so perhaps all is not lost. This morning, Harry Schultz http://www.hsletter.com/ was on Bloomberg and mentioned Agnico Eagle (AEM), Seabridge (SA), Miramar (MNG) and Lihir (LIHRY). They all outperformed their peers today if I’m not mistaken. At any rate, the upcoming leg should be the B wave (of 2 of III); the next big launch is not expected for at least five more months.

Something I learned today that may be of interest to you. This is from Barry Ritholtz’s Big Picture. ProFunds, a leader in bear market funds, is releasing 1x and 2x leveraged inverse ETFs. I currently own their mutual funds: UCPIX (2x inverse Russell 2000) and USPIX (2x inverse Nasdaq 100). The lower expenses of the ETFs and the convenience of intraday trading are most welcome. I only wish they release an ETF for the Russell 2000 (the inverse Midcap 400 is available). Obviously, the small caps offer additional leverage. Since they have outperformed for five, six years now, there's every reason for them to fall much further than the S&P in a bear market.

That’s it for today. I hope this lull is the calm before the storm. Given the listless action of late, the $VIX has made its way back to 15; we may get some intersting days ahead. Good luck and be safe!