My market expectations depend on a number of events. I understand that I have been unequivocal about my short-term bearish stance, but I also have been specific about the levels I have been looking for on the S&P.
I have felt we needed to get down to the 1308 level on the S&P futures. I expected us to pause there and perhaps over a number of weeks test the reality of 1300, as a confirmed psychological barrier that we broke through that should now become support.
That would signal to me that my long-term bullish stance is still in place. Given the uncertainty over inflation, the federal budget and our domestic municipality financial crisis, I think we have seen the highs for at least a month, perhaps into May. Though, I am not a believer in sell in May and go away. This has been a year of opposites; perhaps we buy in May, and stay.
I expect Gaddafi to be dead or gone by the end of the weekend, problem is we have now learned you cannot be long going into a weekend. My greatest fear for the weekend is Bahrain. People do not realise that this is the one to closely watch, as it is a precursor to potential issues in Saudi Arabia.
I am relatively dollar neutral this morning having covered a significant portion of our shorts on yesterdays gap down. I will look for early morning strength, or at least stability. At noon I will begin building back into a larger short position, which I will continue to add to though Friday morning. I look for significant weakness by Friday afternoon, barring an exogenous event such as a bullet in Gaddafi’s head. Names I am long, continue to be potential take out names, I am short stock near their 52-week highs.
This is an exogenously driven market; there are significant concerns out there. While I will be making big bets, I will be taking them off rapidly. Holding periods will be no longer than a few days and I expect to be close to flat over the weekend. Our domestic issues take second place to problems abroad, but should not be forgotten. I will provide an afternoon expectation blog at around 1pm.
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