Melt Up Monday Rub Down…by Michael

Mole is away, but Monday remains the same. Just another melt-up Monday…

Anyone happy with today’s action, go ahead and raise your hand.

I know there are some, but in general bulls have to be disappointed by the anemic volume and the fact that the market spent most of the session eroding the early gains (not to mention the clear distributive action in commodities today, oil especially; but silver and even gold! closed well below their opening-levels). Bears have to be disappointed because this is the exact same title of Mole’s post last Monday – they got beat up yet again today. I didn’t like it because I whipped myself against the grain and traded poorly (no pudding for me tonight!).

Okay, bulls didn’t mind it so much I suspect.

Tomorrow? Oh, should be good. Cramer was absolutely seething with froth tonight, essentially (re)claiming himself master of the universe. I don’t know how predictive that is, but it is damn sure annoying – especially when he doesn’t ramp-up a new name 5 or 10% so a guy can jack it short; justify having listened to someone else masturbating.

If you look real hard, you find Eliot Spitzer somewhere in that Cramer link.

I’m not looking at this week with any seasonal bias now. I would still assume Friday’s half-day will be quiet and positive, but even that cannot be banked. Seasonality has been funny (ha ha) this year and today was ha ha (funny) if you ask me. If I had been aggressively long today (which I was not) I would have been selling-down all day (not crazy about the action; especially in the leadership Chinese names which should have been boosted by the weak dollar).

Tell you what – some of these little Chinese darlings, small as they are, have been very predictive for future direction (they are the hot-money and hot-money is a good temperature gauge of power in the market). If they are weak again tomorrow I will get only more nervous for the long-side; and I will start getting out of Dodge (China-dodge in this case; even as I’ve moved in and out of a net-short stance recently, I have not yet given up my position-long in Chinese growth).

The Chinese names were weak on a relative basis Friday as well, now that I think of it. I’m getting hot under the collar as I write this now…I should have sold-down after all.

Except for the trend, an important! coincident indicator for future direction, pretty much all of the ingredients for a decline are now present. Bears are back to eating peanut butter sandwiches (or bread crusts only in many cases) while momentum, volume-action, sentiment, stalling leadership and pretty much all else has gotten in line with what we should expect to see before a decline.

Mine is not such a bold call, really. Especially because I don’t have a vacuum pointer which sees only looming doom targets below. My confidence is more that we’re not going to see much upside in the short-term. Whether or not the down-side will have teeth will be determined in real time – I prefer to diagnose the flesh wounds once they are actually bleeding, if that makes any sense (right now it’s all fantasy football as far as I’m concerned). If I keep not-long and remain wrong, I can’t fight too many days without shifting and ultimately should do no worse then than to miss out on an opportunity (since I’m moving aside and going fishing in that case instead).

Regardless, we all see once again that it is not so important to get in front of the trade. Yes, I’m as confident as I’ve been in some time that downside-X is now in store. But that is something which has only cost me upside-$ so far.

Beast out.