An Outhouse Of A Market

My colleague Jim Cramer made a comment on his show yesterday that while gross, seems apropos. For those of you that have seen Slumdog Millionaire, Cramer said that after yesterday's session in the market, he felt like Jamal when he jumped out of the outhouse.

It has certainly been a frustrating period in the market, and defense is the best offense right now. It seems only last week we were discussing the S&P 500 holding the 800 level. Now, we are looking at the 700 level for support.

The market is incredibly oversold. It has been down in 10 of the last 11 sessions. By some measures it has only been this oversold two other times: one was last November, and the other was in 1933. My other colleague at TheStreet.com, Doug Kass, went out on a limb yesterday and said that he felt THE low for this bear market could come this week. Now that's sticking your neck out.

It would not surprise me one bit to see that forecast come to fruition, but calling bottoms ahead of time are more often than not losing propositions. That said, I have stated that I felt the market would be higher by year's end, possibly in positive territory for the year.

There are not a lot of headlines this morning to move the market. Both Bernanke and Geithner are testifying before Congress today. Let's hope the market doesn't have its usual reaction to Geithner.

Asian markets were lower overnight; the dollar is slightly higher, while gold is lower. Oil is up near $41. The 10-year yield is steady at 2.92%, and the VIX is -3.5% lower to 50.80.

Trading comment: The incessant weakness yesterday forced me to buy a half position on another etf hedge (QID). The Nasdaq has not fallen near as much as the other indexes, so using this index as a hedge seemed appropriate. All of my hedge positions are still small after taking profits last week, so I will look to use a further bounce in the market to add to those positions.

Gold prices have been pulling back after their strong run-up, but the uptrend remains intact for now. We are also still in positive territory on our short bond hedge (TBT). I know I have only been talking about our hedges recently, but hopefully this has helped readers protect their capital. There will be a time to get more aggressive on the long side, but not yet.

long GLD, QID, TBT