Market Update and Some humour

July 18, 2011 nsl Macro Economic Viewpoint So the big move today was the gap down in equities and the gap up in commodities. As many readers know I prefer gradual sell offs to gap downs, but since we are only in a (hypothetical) 50% short position in equities and a 30% allocation to metals we can move our stops closer to the current market prices and continue playing the trend.

As for the IWM I would place stops at $82 though personally I have moved from a heavy index short position to a more equity (momo plays) specific short position for the 50% short — still in the QQQ and IWM puts, but traders should consider a put spread…. IE buying the QQQ August $61 puts and selling the QQQ August $57 puts…. If you are hedging an existing book of longs, you should likely just stay in puts and not spreads, but if in a full cash position the spread trade makes a little more sense as you can always buy back the short puts for profits on a spike in equity prices….

One strategy that has worked in the recent past has been “buying rips and selling dips”… I personally like such a strategy when QE is in the market, but without QE right now I feel a more cautious longer term bearish stance on the overall market is appropriate.

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