Possible Dislocation Approaches

What can I say? The market has perfectly followed what it said it wanted to do and that is “go down”. We got that in spades today as the Dow dropped about 124 points to cap off a 250 point drop in the last three days. We don’t have a good feeling about the way the market is trading, that is to say, we think the market is about to drop hard. There really is nothing to support it technically at this point. On top of that, the market fundamentals are weak.

I don’t really think there was a lot of fear today so the selling was contained, not panic selling. Market participants think they can just go ahead and ride out any drop since we haven’t really had a convincing drop for a long time. Today did show signs of no support under the market as the Dow dropped to a low not seen since July 7th, and the same is true for the NASDAQ COMP and the SP500. That is called three months of overhead supply, meaning anyone who bought in the last three months is losing money. Admittedly, not every stock is lower than it’s been in the past three months but the indexes are at three month lows, so many stocks are, too.

We note that the oil complex was down today, too. Is that supposed to be bullish? While the precious metals were firm, the HUI, our gold mining stock index took a beating, causing our little gold mining mutual fund, BGEIX, to drop to 12.64, so far we're glad we took profits. Like I said, we will keep watching it for opportunities.

Right now, our “short” position has done fairly well in the two days we have owned it. The RYVNX fund that we paid 20.56 on Monday is now at 21.45 for a nice 4.3% profit. We did have to pay a commission in our account but maybe you didn’t. Either way, the profit is significant in just two days. We don’t think there is any real reason to worry about the position as we think the market has a ways to go before this is over. We have been waiting for this for about two years so we’re going to enjoy it.

Dow Industrials: 10,317.36 -123.75 (10,500 is a memory)
RYVNX: 21.45

The Wednesday Update may not have another post until next week. We are going to be on vacation and may not be able to post anything to the blog. The latest we should return will be Tuesday evening for a Wednesday morning post but we could post occasionally in the next few days if conditions warrant. We don’t think the market is going to go against us for several weeks even though we might get an up day or two along the way. We still would stay the course, the “short” course, that is. Take Care and we will be back soon.