Too early to tell but an interesting juncture in the near term at least... we are now at last week's low point - one could make the case a mini double bottom has formed (off S&P 500 level 1330), from which the market would traditionally bounce. Or it could simply be the market marking time, before a larger move down.

Either way our trading range is narrowing and we should know soon which way the next move is... a move above 50 day moving average (now below 1370) would make us short term bullish, and a break down below S&P 1320 would make us short term bearish. We've navigated this downturn very well this week, so I've lightened up short exposure here and simply moved much of it too cash.

Anything between 1330 and 1370 is simply white noise to me at this point (3% range) - until we make a clear move out of this range its just random trading. My gut says, some order of bounce is due here since things have been quite negative for a while and things don't move in a straight line up, or down. If there is a failure for even a cursory bounce from here, that would be quite bearish...

I'm still thinking of a rotational correction to follow past patterns - looking for any signs of strength in retail, financials, and homebuilding... the latter has at least seemed to stop going down. Or I guess coal fertilizer and natural gas can go up every day for the next 120 days. We'll see how it goes. Currently swimming in US Pesos at 28.5% of fund, awaiting clarity.

You expert technicians out there - feel free to add your viewpoint in comments... I'm an amateur technician (at best)

Exactly one year ago to the day, I wrote about Yahoo (YHOO) being a casualty in the search war. The war has taken its toll and Yahoo is on life support today.

It all began when Jerry Yang made the catastrophic mistake of hiring Terry Semel in 2001. Terry had a backward view of the world. His experience was in Hollywood where everything was packaged. The internet business, however, is like a "live play" where you have to think on your feet. And thus, he was not equipped to move Yahoo forward as he was lost himself. He did not even know what email was when he came to Yahoo and he was baffled when employees would send email. He thought they should just pick up the phone and call or walk over to their desks to talk to each other.

Terry's lack of insight lead Yahoo down a path of portalization, where information was pushed to the user. He failed to see that the next generation of internet technology was changing the balance of power on multiple fronts such as electronic publishing, digital marketing, storage and retrieval - all areas suited to search - which Google packages and delivers today using a simple interface.

He ended up turning Yahoo from a technology company to a media company with marginal economies of scale. In fact, Farzeed Nazem, CTO, spent more time filing papers with the SEC over stock options purchases and sales than doing his job, as there was no need for him. It was an internal joke that he was in hibernation.

Susan Decker would routinely tell the press that "Yahoo's goal is not to be number one in search" as Terry had convinced them that a company driven on celebrity power would overcome anything.

They only thing Yahoo had left was eyeballs. I was not convinced Yahoo could continue on this path and I asked Terry if a Microsoft (MSFT) takeover of Yahoo was inevitable. Terry was puzzled. He was absolutely clueless about what was going on. He was more worried about where Brad Pitt might be next so that he could be there and splash some Yahoo money and impress his Hollywood buddies. Terry knew Hollywood was all show and no cash; but with Yahoo money, he could rule Hollywood.

By this time last year, Jerry realized that things were in free fall and he took the helm to avoid a crash landing. Two weeks prior to the Microsoft takeover, I informed Jerry and company that a takeover was imminent. Jerry did not even realize how low they were to the ground. Microsoft offered Yahoo $44 billion and in the end, Yahoo surrendered to Google for pennies.

I believe Jerry Yang is resilient and he might still be able to turn the company around if he remains at its helm after the shareholders meeting on August 1.

As for Terry Semel, he has left behind a trail of destruction. He has made Silicon Valley brainiacs the butt of jokes in Hollywood and he made 500 times more money sinking Yahoo into the ground than he did doing his best work. Today, Terry is still busy selling Yahoo stock and he has sold over $600 million to date.

Taking Ultrashort Basic Materials (SMN) up to 4.1% of fund
Taking Ultrashort Oil - Gas (DUG) up to 4.3% of fund

The China news might finally be the catalyst to break the trend - we'll see. This is a market (energy) trading more on emotion and momentum, rather than the underlying fundamentals at this stage of the move in my opinion. And when 1 commodity sells off the hedge funds sell off everything no matter the fundamentals. So I'll just increase these insurance policies (hedges).

So far the "insurance" policy in the Basic Materials has been a big loser for us

(ouch)



....but the Oil - Gas position has actually worked very well, since we entered at an opportune time. [May 21: Oil Looking Toppy to Me - Starting Ultrashort Oil & Gas]

(not bad from late May)



Politicians meddling might hurt near term psychology as well - parabolic markets are generally built on psychology first and foremost. [Danger - Politicians Ahead]

If a sell off would ensue from here, this means that our rotational correction thesis has played out... yet again - about the 5th time in a row since last summer. Still up for debate if that is indeed how it plays out as freight trains like this are a dangerous thing to stand in front of. If we're wrong, we'll ratchet down these positions quickly.

Disclosure: Long both positions in fund and personal account

I have been watching in amazement while the price of crude strangles the world's economy at $139/bbl. There have been riots and strikes in Europe as gasoline and diesel approach $10/gal (U.S.). In the third world and developing countries, many people have to decide between driving or eating.

Crude is up 57% since February and doubled in a year. In early June it rose 13% in a single day. I haven't seen something move like this since the solar stocks in November, 2007 or the Nasdaq in March, 2000. But like those former parabolic critters in the rear view mirror, the current commodity speculation in oil being is pawned off as something unique - a "supply/demand" crunch or peak oil (as in the difference from Monday to Tuesday). Yet it looks to me like just one more chapter in the age old myth of "It's different this time".

Mechel (MTL) continues to grow, grow, grow - more money, less problems... (those of you above age 35 ... that probably went over your heads) This news could be the source of the recent weakness (some dilution after all)

• Mechel (MTL), Russia's largest coking coal miner, could raise over $2 billion in a preferred share placement in Frankfurt and Moscow that will price by July 22, a source close to the placement said on Thursday.
• New York-listed Mechel, also Russia's sixth-largest steel maker, will launch a roadshow on July 2 after announcing the placement on June 23 or June 24
• The source said the placement would raise over $2 billion were Mechel to place its entire allocation of preferred shares, more than the $1.5 billion quoted in April by a banking source as the company's ordinary stock has risen in value since.
• Mechel, controlled by billionaire Igor Zyuzin, last year acquired substantial coal assets in the Russian Far East, including the country's largest untapped coal field.
• Mechel also plans to spin off its mining assets and sell a stake of at least 20 percent in a new company valued by Zyuzin at $20 billion compared to Mechel's current market value of $17.1 billion. The firm has not said when, or on which bourse, this initial public offering would take place.

• Lately, the world's leading steel companies have dealt with the sharp rise in costs for raw materials, which has squeezed margins despite the robust global demand for steel. Meanwhile, shares of Russia's Mechel (NYSE: MTL) have more than quintupled during the past year. The secret to Mechel's success is in the legacy of U.S. Steel (NYSE: X), whose pioneers recognized the importance of sourcing their own iron ore to ensure competitive steel pricing.
• Steel companies that didn't adopt this model have struggled more than some others, and now POSCO (NYSE: PKX) and ArcelorMittal (NYSE: MT) are both making moves to develop mining projects. Brazilian steelmaker Companhia Siderurgica (NYSE: SID) impressed me back in March with large surpluses from its iron-ore mining operation that added substantial sales profits beyond the cost savings of the integration. Mechel takes this idea to the next level, with its massive diversified mining segment generating huge profits, in addition to producing everything needed for production, including coal, iron ore, nickel, and limestone.

  Subscribe with an RSS reader Older News Archive Add news to your web site