Trade Time

I don't know if the rally will end with a burst of bullishness or if it will lose steam and end with a consolidation pattern, but as I've said in recent posts, now is the time to be window shopping as a bear. Have targets ready in case the bear swiftly resumes.

I come into today with long yen, short oil, long gold miners (in addition to shorter term GDX and GDXJ, I have been adding NEM Nov 55 calls) and short Apple, plus a lot of cash. I will be looking to either day trade the market or buy TLT/ZB on weakness.

For yen, I want to see if we start getting some deflationary signals in the market. I you click the yen tag, you can see the gap between the yen and the spread between US and Japanese long-term govt bonds. If there is deflation that drives interest rates lower, the yen can theoretically return to form as a deflation winner. If inflation will kill the market, then the yen's run could peter out this month. Additionally, this relationship need not hold longer-term because it wasn't this strong in the past. The relationship between the bond spread and yen was tight this year because the move in bonds dominated financial markets.

I've talked about the oil analog before. A strong analog would have seen oil drop last week. Instead, it popped to $101, and now WTI tagged a $93 handle. As I'm typing, CL has reversed $8.39 per barrel from Friday high to Monday low. The waterfall decline starts below $90 per barrel.

Apple was mainly a tactical play on a market pullback. I could be out of it this morning. I will likely take a short position for the next leg down in the bear market though. I have it because I'm mostly in cash with little equity exposure either way right now.

I'm out of most TLT calls, but I think gold miners offer similar exposure here. I expect gold will rally with ZB, though it probably won't be step-for-step on most days.