Contarian Commentary

Folks,

Euphoria is very fleeting and when you are short stocks and in  a euphoric market reacting to what is perceived to be good news such as the government coming to agreement with regard to the fiscal cliff is a mistake. When you include Monday’s move higher did I expect such a reaction by the markets? Honestly, no but a positive market reaction was predicted. We have some serious head winds in front of this market and first and foremost is the debt ceiling debate. I can assure you that given the slim majority that John Boehner found himself re-elected as House Speaker you can bet that the debt ceiling debate is going to make the fiscal cliff look like a warm up game. The next head wind is interest rates. In The Week Ahead Commentary I have mentioned several times that rates appear to have bottomed and will probably head higher by years end. The Federal Reserves meeting notes which were released today implied that we could see the end of Federal Reserve bond buying by the end of 2013. Will that happen? No and it doesn’t really matter. The Federal Reserve floated a trial balloon by releasing that statement to gauge the markets reaction and honestly, it held up fairly well.

So, where to from here? I think that there is a good chance that we head lower. Why? You need only take a look at the price action of the US Dollar which rallied hard after the Federal Reserve minutes were released. It is the first close of the US Dollar above it’s 50 day moving average since early December.  Watch 81.46 which marks the pivot point of the “W” formation. If we see a breakout and close above that level then look out below.

As we move into Friday I want to look to open a new position in the Retail Holders as I believe that this sector is about to break hard and this week’s price action was a gift to get back in after taking profits on our short last week ahead of the news. I think that this sector offers one of the best shorting opportunities contrarian commentary.

Contrarian Commentary