Position Update August 30

Well as feared the Russians were coming, and wiped out my short grain position.  A pretty bad loss whose saving virtue was sticking to stop loss plan and indeed getting short the S&P at 1406 which I’m ahead on, and even going long — though a smaller number of contracts of soybeans at 1733 which is now up a solid 1%.

I added this morning to it at 1746 which knock wood appears to be the low of the morning and moved up a stop to 1736.xx.  This is an awfully tight stop but the soybean supply/demand situation is not as bearish as with wheat or even corn with murmurs of $25 soybeans.   They look really good right now, and the thesis is after all is to trade into breakouts and let it ride:

I have also added a small position in Live Cattle at 125.575.  Here is the six month chart.  Barron’s wrote about Live Cattle in late January and I’ve kept my eye on it since, with another brief small trade earlier, and appears to be poised for a robust technical formation (similar to Cotton right now at 77 which I may nibble in as well)

I feel comfortable even if just slightly ahead on soybeans & S&P but is this an internal trading signal that there is little consternation or just a false hope generated from relief after the surge in wheat and soybeans that knocked me for a loop?

On the stock side, large cap tech and ZNGA under 3 among others still looks insanely cheap but I am waiting for a downswing or the S&P at least to head back to 141x before putting on a position like that.

The SPX topping out?

Doug Kass at theStreet.com put up two contrasting files showing specific points where lows in the VIX signaled forthcoming drops in the SPX, five times in the last two years.  He was on CNBC with the same message two weeks ago — the market effectively unchanged since then.

Bespoke Investment Group has a compelling chart that the gains of late in large caps have been mostly low volume gains which is technically ominous.

Some “Triple Top” talk evidence seems specious to me — Business Insider cites this as a possible “Triple Top”:

chart of the day, s&p 500 three spikes, august 2012

But had been warning about the same thing in September 2011

s&p futures head and shoulders

In short the S&P does appear posed to this rube technician at a decisive moment which possibly suggests a downward bias, that is also seasonal and will fluctuate with the election.  It is notionally cheap but facing huge European headwinds putting the smaller cap Russells in the unusual position of being a slightly better equity safe haven.  Few ports would be safe in that storm however.

Apple (AAPL) is 5% of the S&P and 13% of the NASDAQ 100 Capitalization-weighted indexes and so a meaningful short term up move (likely) in this one name could pull the entire index higher.

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