Why We Won’t Go Long Here

May 18th, 2010

If I may, I have some general thoughts I’ll like to share with everyone. Rarely do we dive deep down into the global economic picture around here since we try to focus on solid technical analysis happening right now. But last night I had a couple coaching sessions and the question always comes up: “Kirk, is it a good time to go long?”

Here are my top 3 reasons why I am hesitant to say yes:

  1. The debt crisis in Europe is going to spread here to the US – period, end of story. Like it or now I feel like the Greece situation is similar to the sub-prime event here at home. Remember when we all used to say “yeah sub-prime is a problem, but it’s only a small piece of the market.” Well enter Greece center stage. And it’s not like our government is spending less and cutting taxes – they are spending at historic and record levels. The crisis over there will get worse and it will effect us all in the next couple years.
  2. The markets are forming a major long term top. Just look at the S&P 500 and tell me that this doesn’t look like a classic topping pattern. Honestly I could see the markets move down BELOW the bottom in March in the next two years.
  3. Finally, the dollar is unbelievably weak. Yes it’s been strong recently but only because we are “preceived” to be a safer investment than Greece and Europe right now. Remember that our dollar is fiat money – meaning that nothing backs its worth but our history of paying and good credit (for now). That’s why we are seeing gold breakout into high levels consistently. Gold is about the only thing I would go long right now.

I know this doesn’t paint the best picture – but it’s the truth. We were big players during the 2007-08 fall which we were late to the game but profited wildly on once we got in. I vowed then that I would not miss another opportunity to short the market into oblivion. If the S&P breaks this level below over the next year – I will get heavily short and stay that way for 2-3 years.

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