Bookkeeping: Cutting Across Board

The S&P 500 is butting up against the 20 day moving average which it did yesterday afternoon before being pummeled in the last 15 minutes - roughly the 960-970 range. To see a change in character I'd like to see a move back over S&P 985. Until then I assume all rallies will fail until proven otherwise. There is still some upside between S&P 960 and 985 but I'm will to give up that portion of the move for safety reasons.

With that said, I am taking another layer out of many positions and rebuilding hedges to the short side. One group that has been destroyed has been solar; First Solar (FSLR) put out a nice report last night and it seems people realize the world is not ending or that sector won't b e dead in 2009. Not that it helps much, because many of these stocks have lost 70%+ of value in past few months and this 10-15% rebound means very little in the big picture. Perception is reality unfortunately. With their debt loads and need to access capital markets this might not be the correct group to own right now but so many are trading at 2-4x PE ratios it seems obnoxious to sell down here; but I am cutting back. But it is not just this group; I'm taking profits in many names and cutting back long exposure.

Again if we can begin to stair step higher and not be so volatile I'll be happy to be bullish but we've made 15% on the index in basically 1.5 sessions. The market lacks any fundamental bent and is trading on emotion; as hard as it is to believe you can see fear turn to greed very quickly and a move over the Oct 17, 20, 21st intraday highs would probably be a trigger - that level is S&P 985. But for now I assume there will be many people who are happy to sell for less losses than they had on their books 3 days ago and that will create some overhang for the bulls. But in this market things can literally change in 5 minutes so we'll be flexible if sentiment changes. Apparently yesterday the market sold off 400 Dow Jones point based on a news report of 1 comment GE's CEO made at a dinner in Spain. Which shows you this market is nonsensical and not a place with any real support. But that must be balanced against the oversold condition on so many stocks along with a potential "double bottom" formation on many indexes. Put simply - who knows and in 10 minutes the whole complexion can change so we're limiting risk and willing to pass up upside for that.