Huge test this week

Positions
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+100 GS @ 98.55, increase stop to 86
+2000 UYG @ 2.00 (longer term holding)

Markets
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US equity markets soared last week in a much needed and expected bear-market bounce. The Dow and S&P both rose more than 10% on the week and the S&P crossed some key levels. This week is going to be very important for directional trade. I was asked last week if the huge 359 point rally in the Dow was just another one-day headfake, and I correctly predicted the start of a much stronger move. However, fundamentals remain terrible and we are likely to see contracting economic data this week. Are the shorts gone? Probably not - and it might be the best time to get short. I'm still not sold on the 100% doom and gloom and Geithner's plan, if ever released for heck's sake, will likely cause a seismic shift in perceptions. This could be for the better or the worse, but it should have a lasting impact.

Short sellers are likely facing a positively skewed probability curve - likelihood of small frequent gains, and possibility of huge losses. I personally would like to test this week. Let's see how the market reacts to negative economic data. Last week we generally had better than expected data. I was hoping for downtrodden data to see if the momentum could hold in the face of adversity.

Monday we will get a look at NY State Manufacturing and nationwide Industrial Production. Both are expected to contract, but both are expected to show improvements. I'm not looking for home runs here. If the markets perceive that the worst is over, good things are likely to happen. I don't think we are there yet, and thus this is a big week for me. Can we hold onto the momentum or is last week going to look like a mere hiccup in the long-run.

Live from the amazingly beautiful Golden State,
TM