Wednesday, September 3, 2008

Selling speeds up

The 10 year rate is at 3.70% and we have three talking heads from the Fed arguing for higher rates! Huh?

What mirror are they looking in?

This commodity meltdown is encompassing almost all sectors of the market, and it is getting to the level that "snapper" now needs to show his head.

Rates are not down just because of a flight to cash, but because bond buyers pragmatically assess the state of the world economy. And it is soft.

Commodities are overpriced, but the wrong way hedgies are excaberating the situation, fueling the panic, and making things rather disorderly.

But commodities and stocks don't go down in straight lines, unless you are liquidating positions. Now it looks like the beginning of some short covering in oil and steel and gold and the fertilizer stocks.

With the Dow down 95, and 25 on the Naz, I think snapper is already starting to nibble.

And I think they try and rally oil off this $108 to "save" the market. If oil rallies from here, they'll be able to say the economy isn't going to hell. And there are enough people stuck in oil, that they'll try and goose it higher. And Natural Gas (UNG 33) is showing some bids here also.

Why would this scenario play out? Someone is buying distressed merchandise from these hedge funds going bust. How long do you think they want to hold it for in this capital constrained economy?

Look at the names down the most, and nibble at them with calls.

That's how I'm playing it.

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