Friday, February 29, 2008

Raising some cash for March

The action in stocks continues to confound me. We had upside breakouts from widely observed triangle formations in both the Dow and S&P (graph below); however, both have been repelled by their 50 dma's. Wait a minute, was it just retesting the breakout? Either way, the tepid volume shows a lack of conviction in both bulls and bears.

If the S&P manages to get above the previous high of 1396, there is another overhead resistance around 1406-1410 that it needs to contend with. FWIW, I'm on record as saying we'll retest the January lows before moving higher. The most recent price action puts us in wave 4 of a 5 wave down. Accordingly, I've been raising some cash in order to better take advantage of another bottom.

About a week ago, I sold some agrichemical names that have been performing well, perhaps a little too early. Names like POT and MOS have been on a teer, but as I recall, they were taken to the woodshed several days before the January low. If the market were to break, the strongest sectors would break last, but break they will.

I also closed out all positions in my PM trading account today while leaving the core positions intact. I stand by my prediction that we'll see phenomenal returns over the next two months, but the PM action, particular that of silver, looks toppy. While we can certainly go higher without pausing, I wouldn't bet on it. More than anything though, I want to preserve this month as one of my best, which barring a calamity on Friday, is assured.