Tuesday, September 14, 2010

Bookkeeping: Adding Back to Cleveland Cliffs (CLF)

The market is a freight train right now - all news is good news, and days there is no news the market also goes up.  It seems very likely that we are going to levitate to S&P 1130 no matter what at this point because the computers have deemed it so.

It is nearly impossible to buy anything since it is so extended... hence the rare pullback of even 5% in a stock is considered a gift.   I am going to get back the Cleveland Cliffs (CLF) I sold last week (at $67) here on a pullback to the 20 day moving average near $64.  There is a gap at $62 that needs to be filled as well, but since the stock market will be up 23 of the 24 days of September (apparently) one has to grasp at any entry points.   I just threw back a 1% allocation and if it drops to $62 will throw on another 1%.

  • Cliffs Natural Resources Inc. (CLF US) fell the most in the S&P 500, sinking 4.8 percent to $64.28. The largest iron-ore producer in North America said it now expects total 2010 coal sales of 3.9 million tons. Revenue per ton will be $115 to $120, a decrease from an earlier forecast of $140 to $145.

Normally you'd shun a stock after news like above, but in the 'risk on', 'risk off' market CLF will just go back with every other commodity stock tomorrow and trade en masse... if the S&P 500 is down, CLF will be sold and vice versa.  Fundamental news only matters for a few hours and then every stock once more is married to the ETF and what the algorithms are buying or selling that day.


On that note, if the S&P 500 hits 1130 and breaks through it without a moment of consolidation I expect that to be a trap for bulls.  Reason being at that point every short will throw up their hands in disgust and cave in as "the market just won't sell off no matter what".  Then there will be no one left to squeeze in this epic 10-11 day move.   I'd feel much more comfortable with a move over the top end of the range after some consolidation but as I read the blogosphere and financial sites everyone is looking for a pullback - hence the most pain would be inflicted on the masses by a continued upward movement.  Since *everyone* (silicon or carbon based life forms) is looking to "buy once we break the range" hence my belief that it could be a trap.

This move is very atypical and reminiscent of the rallies we saw in March 09 thru April 10 - i.e. the "V shaped rallies on no volume".  May, June, July were much more normal and historical in how the market acted and hence much easier to trade since your historical playbook actually meant something.  Now we are back to things we rarely see.  As the S&P 500 turns green for now, we have only 1 down day the entire month.  Complacency building among market participants as "it's so easy being long" again.

Long Cleveland Cliffs in fund; no personal position

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