Monday, March 14, 2011

Indices Updates: March 14, 2010

February 25, 2011 - I suggested

"SHORT Dax  Long CAC/IBEX" as a value play."

Results of my suggestion (rougly) Feb 25 to March 14, 2011:

Dax CAC 40 IBEX 35 Net Dax/CAC Net DAX/IBEX
plus 3% minus 3.5%minus 3.9%minus 0.5%minus 0.9%

It looks like the answer to my question from my Feb 25th post is that the whole EU is now moving in synch and that outright shorts on these indices would have been much more profitable. Dax lost its safe haven value. Value plays long IBEX and CAC will only work once the region goes in recovery mode and risk comes back to equities. I still think the Dax can continue much lower considering its "OVERLY" stellar performance last year.

If recovery does come I would expect the Dax to stagnant and the CAC to catch up. If Spain can fix its sovereign debt issues it should follow. I'd put more money on the latter...


From February 23, 2011 I wrote that I was bearish short term SPX expecting at least a 5%+ correction (click through to see rationale). I follow up on the 25th with consistency in my view. I have continued to maintain this view. 

The test did indeed come of the 50 day SMA and now we have finally broken through with a high to low range from the top of about 4%. 

  • If prices can close strongly below the the 50 day SMA this week
  • RSI maintains below 50
We can see prices go further below. If this trend reverses this can me RISK on strongly for whatever reason and has implications of USD strength which would completely kill my bullish crude thesis. 

Key levels will likely be:
  1. 1275
  2. 1250
  3. 1230

If these targets are hit I will have to scale out or hedge accordingly if the markets are correlated the way I suspect. Of course I can check this with short term correlations. I will have to do this later. 

Either way it is good to see my short term bearish thesis on the SPX coming to fruition. 


Alexander Lê
Managing Partner 
Analyze Capital LLC

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