Titanium Metals (TIE) and Short ETFs

Titanium Metals (TIE) is going to be added to the S&P500. Sold the bugger recently as its been technically undecisive - obviously one cannot anticipate a news event like this. The key area to me is $32.50; if the stock can hold that area it should do well near term; if not it might just pull back.

I did just sell a large slab of my 3 short ETFs. My strategy at this point is: We are now at technical support levels for the indexes. Despite the scary look of the market its been a pretty negative week and this looks like a decent level to take some off the table. If, however, no dip buying occurs and the market breaks support you can simply buy back these positions at a bit higher of a price either later today or Monday. That's how I am treating them.

With that said, the reaction to earnings have been poor overall; and the time to be wildly bullish and ignore all bad news appears to be over for now. Before people were cheering the Fed cuts without realizing why the Fed was so seriously cutting rates. Now they are seeing the reality in the earnings reports/guidance of the US economy. Doesn't mean we go straight down - it just means (for now) people appear to be getting more realistic. One big arguement for bulls is this market is cheap on earnings. Well my thesis has been forward earnings for domestic facing companies are too high and if 2008 estimates finally do come down - then the market looks a lot less cheap on '08 estimates. Hence why I have been focusing my short ETF with Russell 2000 rather than a S&P500 short ETF since those larger companies at least have some buffer with international markets. That said, a lot of banks make up the S&P500 and they are just a disaster right now. And unlike the analysts who were cheering the 'kitchen sink' quarters, saying its all clear now - I don't think we are even close. Look for the bathroom sink, the outhouse, and the mother in law's room to be coming in upcoming quarters for the financials. And that is if they are successful in bailing themselves out with ridiculous 'innovative' ideas (see 'The Super Bailout Fund') - if they don't, and they are forced to bring this crap onto their balance sheets it's going to be a lot worse. With that said, the financials have been gutted this week so you'd expect some snapback bounce, but just like retailers, homebuilders, and I'd argue restaurants - you want to be shorting any washed out/short covering rallies for the foreseeable future. Just remember that the next time analysts are calling for a bottom in any of these sectors - we are just now (potentially) entering the slowdown the past 3-4 months. That's not a time to call a bottom.

Just remember, we have to balance the reality of all this with the Fed continuing to print money, and step in with potential surprise cuts or deeper cuts than we think (50 basis points on Halloween?) Boo. So we could see hectic moves in both directions.

The next step is you will start hearing the media ask "can world growth keep the US economy going?", "can world markets continue their bull run with the US slowing?" These are questions I was asking 6 months ago but as always I was early. The market seems to ignore things until the writing is on the wall...

These are good questions - let's say China "slows" to 6% GDP growth from 11% due to US slowdown. Still awesome growth, but is the world pricing this? No. What about 7%? 8%? So we have a lot of uncertainty in the months ahead.