At this point, the only thing driving equities is the reflation trade. I still suspect this trade will reverse starting next week. I'm not sure how all commodities doubling in a years time will fertilize these green shoots. Especially with falling wages and higher taxes. If the reflation trade sticks then the Consumer stocks have no business joining in the equity orgy. And even though the bond vigilantes have flexed their muscles, the REITS continue to go higher. What a joke. However, it doesn't stop RIMM sticking it to me like Teddy KGB. EWZ short is underwater but the long CLF, XLE, GOLD has picked up the slack. Last week I started buying a little US Wampum, mostly to hedge to my gold position. The long TLT trade lasted all of two days when it went from a small profit to being stopped out for a small loss. I went back for more punishment yesterday and put on a small long TLT position once again with some July 93 calls for 1.90.
Yesterday I picked up 3 additional positions. UNG, PCU and CAL. I got lucky to picked up UNG at the open before it jumped 9%. PCU was added only because copper was relatively flat yesterday when the other commodities started to run. I'm probably early on CAL as 8.55 might be a target but I took a half position in some JUL 10 calls for .80 . I view this as a round-about way to short oil near 65 but has added benefits. I prefer to ease in and then gradually leg into a spread that I try to work the position for the duration of the expiration. For example, last expiration I had a straight long IYR May 28 calls that gradually turned into a 28/30 vertical, which eventually turned into a 28/30/32 butterfly, that then turned into a bear call spread after I sold the 28's, bought some 32's to make it a short 30, long 32's. As if that was not enough, in the last week of expiration I sold the 32's that left me naked short the 30's, which was uncomfortable. Fortunately the IYR pulled back to 30.80 allowing me to buy those back for a profit. This is the reason providing updates on positions here is impossible. On any given day I may adjust a position for various reasons. All in all I was lucky to have profited on every morph of this position. Now the example above is not the norm and is a recipe for disaster. However, in a range-bound-whipsaw market, I have to adjust my style. CLF has started to become the IYR of last month. I've went from long the Jun 24's, to a 24/26 vertical on a 3:2 ratio, that now stands at long 20 of the 24's, short 30 of the 26's and long 15 of the 28's. Wtf? lol. Today I will likely go ahead and take this to a full butterfly by being long 20, short 40, long 20 on the Jun 24/26/28 strikes.
Finally, I know why everyone is wanting to get long Ford. It's going to be an uphill battle for my short, but in due time the balance sheet will rear it's ugly head.
[update 1:25pm] CLF is now a butterfly. I was able to achieve the ideal scenario in that now I have a full blown butterfly spread by being long 20 of the 24's, short 40 of the 26's and long 20 of the 28's, and for a net credit as a result of the position morphing described above. Now I get another look next week with no risk to see how this dollar massacre plays out. DXY has breached below the measured move of 79.75 (at least the way I drew it) and is currently at 79.39. I will start to get concerned real soon if it does not stop falling. I'm not sure if this is part of the master plan to get to banks to earn they way back to profitability, or to screw our creditors via inflation, or just a bi product of BerTanke's QE, unnecessary panic over the dollar (its too soon, imho), or this is the real deal, or all of the above. *thurgy scratches head* I'm still sticking to the deflation theme for the next 12 months, but I'll admit that my confidence has been shaken.
