1. Technology – there will be more and more consolidation.  Any technology that cuts cost and takes advantage of the more to digital.  Examples: EMC, AKAM, IBM.  I own calls in EMC.

2. Commodities – Natural gas has been a laggard but I still think it’ll catch up.  Steel and other metals should do fine.  I own SD and CLF again.  Will add some SLV and GLD possibility later.

3. Financials – Following the whales of the industry – they see upside and I think they are much smarter than the analyst who get paid to talk not to manage money.   I own BAC, C, and CNO.

4. Housing – They should find some support because although housing is still in the dumpers, they are far too shorted and could stage a decent rally.  Looking into KBH and IYR.

But that’s it.  No time for charts but the S&P is oversold.  Treasuries are way overcrowded and it’s dead money now.  The dollar tried to make a decent rally but now it has hit resistance so we’ll see a tumble down.  So hold on tight.  We’ll be in for a pretty decent rally into the end of the year.  I think the surprise is on the upside especially with headlines calling for a 20-25% drop in the market and that treasuries are not in a bubble.  Are you kidding me?  We’re already close to negative real returns.  Capacity utilization is close to normal so we’ll see some pick up sooner than later.

So the market have retraced a bit from it’s awesome run since the middle of July so it shouldn’t be a surprise because every time the news tells you the reason that the market went down, it’s pretty much old news.  I get surprised every time the talking heads try to give a reason for why the market drops.  Can’t you just say the bloody hedge funds and prop desk are just taking profits?  It’s not like we didn’t know that we might double dip.  People were talking about a “W” shaped recovery since the financial packaged was passed over two years ago.

Savings rates are still high but I think that money will start flowing soon.  The commodities prices are telling us that there will be inflation before we expect it especially with such cheap money out there.  Every month that we have such low rates, people are refinancing and magically there is more spending cash.  I think it’s probably a good time to take advantage of those great rates to buy some real estates but while that happens people should probably find a place to put their money other than treasuries.  Treasuries are for the meek.  But the meek doesn’t inherit the earth in this case.

But I think the market will bounce.  The bad news is priced in.  The valuations are getting too tempting not to deploy money.

In fact, I’m thinking of buying some hard assets, namely real estate.  Rates will probably never be lower and real estate is a great hedge for inflation and the dollar.  Well not as much for the dollar but it helps.

S&P 500 July 22, 2010

The market is making another attempt at breaking resistance of 1100 for the S&P 500.  I think it’s going to happen this time. Usually the third time is the charm but there may be some mixed news with earnings but in general, the market has been able to bounce back especially after bad news.  So it looks good.  I started buying again as the market started softening.  I’m a bit long with very little hedged at this time.  I think money will start getting back into the market soon as the year ends because there really isn’t anywhere else for it to go at this time.  I think the real estate market is getting stable with the low rates and there will be some growth there soon as the population growth because it’s been almost three years since the house recession started and people have raised their savings rates for the past two years from near 1% to close to 4% now.  Corporate coffers are full.  Private coffers are getting full.  I don’t think all the money will come at the same time but when it starts moving, I think it’ll be rather swift.

Longer term, commodities and energy will rule again.  I bought a lot of calls in silver and solid positions in CLF which have been hedged by selling some in the money puts now.  I am invested in a bank, some natural gas, and short the treasuries.  I’m going to start pull off some positions after tomorrow and Monday when it break resistance.  The bears have much more to lose than to gain with all governments ready to keep everything stable.

The rally is still going but it’s getting a little bit more weak.  The market seems to have come a long way but resistance seems to have come and we’ll see a test of it.  It looks like 1100 on the S&P is a critical point to watch but there is a possibility that earnings will make a big push to put it over because the markets are not quite overbought yet so we may still have some room but it’s probably time to either buy some protection or sell some calls or lighten up until we see a breakout.  Either way, they are all very smart things to do.  I lightened up and sold some calls but looking to enter some names when I get the chance.

The charts suggest there’s some room but just be careful now.  This is where wealth preservation wins but I feel that there are more gains ahead.  It’s the macro economic trends that will push us toward expansion and no one can do anything about it.

By the way, I’ll be updating the design soon.  I haven’t had time to change it up because there are more lucrative web projects to work on but soon.  It’s a bit of an embarrassment to have the blog in this type

Technically the chart looks dangerous but there is a bullish divergence in the charts.  The risk reward is now skewed to the positive side as there isn’t much reward for the shorts.  I think we’re here.  I don’t want to say up up and away again but it sure looks like a great time to throw in that allocation to the IRA.  I’m looking into techs, natural gas, commodities and some financials.  Let the bulls run free again.

- Mister Bull