Saturday, July 6, 2013


Since the market bottom of the 24th of June, oil (USO), oil servicers(OIH ) and solar (TAN) made durable bottoms, and are breaking out.  If SPY continues higher, it looks like the great rotation out of bonds is going into energy.

I have and hold a nice position in YGE, HAL, and SWN, and I see all of these are going to challenge the recent highs.

SPY is an enigma here, and Friday is a tough day to draw many conclusions.  SPY filled the gap and broke through the 50 on a holiday trading day.  I want to see what follow through there will be next week.  On the 10th, to add some uncertainty Ben speaks, so it will be interesting to see if he tries to jawbone the bond market back into place.  Higher energy and higher interest rates does not a bull market make.  My other concern is with such a strong dollar, how many companies will disappoint and guide lower. The market is expecting a hockey stick in terms of earnings growth in the second half, and it is inconceivable to me that the market is going to outperform a slowing China, higher energy, and interest rates.  Something is going to give somewhere.

I placed a ES short position on Friday, and recommended buying SH over the next three down days in that ETF.  I also suggested taking a 25/30 August call spread on SPXU.

Here are some charts.

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