Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.

Abraham Lincoln

COT index number is +10.4%. Last week we had a positive number and a bad decline. Clearly placing any reliance on this indicator currently is not justified.

Technical Picture

On both the 5-day and 10-day chart, the trend is firmly down. Neither chart is anywhere near a technical support level.


The economic data is not clearly supportive in the short term, viz, into next quarter, of earnings growth. Jobs are not being created in the numbers required to support a stronger economy.


We are entering, historically the most volatile part of the year, September. September is historically a bad period for stocks.


Will be entering debates around the debt ceiling. This generally deteriorates into a fiasco.

Federal Reserve

There is Jackson Hole, which Bernanke will not be attending this year, I guess because he’s on his way out. The market is still questioning the Septaper. The Federal Reserve holds circa 20% of longer dated Treasury paper and circa 25% of MBS. A Septaper will have consequences into the fixed income markets.

Bond Market

Is trading yields higher. The Bond Kings are taking a hit. Can stocks trade higher into a rising yield market? Yes, if yields are rising due to a stronger economy and stronger earnings.

Yes, if the rise is due to a rotation out of fixed income into equity.

But, if the economy is still weak, and the rotation out of fixed income is to escape a taper…then, the picture isn’t quite so cut and dried.


Is rallying. Does it mean anything? Well maybe. Maybe it is just short covering and a bit of a short squeeze. Maybe it is a re-correlation between the paper market for gold and the physical market for gold, which, has been very wide recently.

Is this a market where you feel confident in taking a directional position?

I don’t, not for trades that are going to carry me into the next quarter. Which is why in speculative swing trades I am going to stick with market neutral trades and let the chips fall where they may and concentrate on simply managing the positions to lock-in-profits when they enter profit zones.

This week’s trade.

An oil refiner. This stock has multiple corporate actions that will effect a change in its pricing. A little more difficult to predict is whether it will have a beneficial effect, or, a detrimental one. As a market neutral position we are not too concerned either way, we just want some movement to generate a profit.

Entered Trade