Greenspan put ... put out to pasture

Over the term of Alan Greenspan, the market had come to expect that if anything bad happened to the equity markets, Greenspeak would be there to bail them out. It became known as the Greenspan put. In 1987, 1989 and later during the Asian contagion, Long Term Capital Management, the implosion of the dotcom era as well as 9/11, Mr. Greenspeak was there with a helping hand bailing the markets out with excess liquidity. He's off to pasture now and the Bernacular seems to be singing a different tune. The result is some serious red on the screens overnight as they started selling the futures after the close yesterday and continued selling them overnight.

We will see a big gap down opening; a gap down that destroys a lot of equity and that truly starts to put some fear into the players out there. It's a gap down that the dipsters likely won't want to touch (although if a gap down holds and they close it, the whoosh up to form the middle part of the W will be underway and that will come somewhere in this move down). A gap down that will will show huge volume once more to the downside. If we needed a sign post that the party is over, this gap down will do it. The game is over and now the bear is back and in full coat.

Yesterday I sold down my holdings more, spread my gold a little but mainly raised cash into the early strength. I will get hurt today just like anyone holding anything, but if you have to choose a sector to sit in, precious metals is not a bad one. Like oil, they are printing money right now and they will be one of the first ships to right when the turbulent waters calm.

The real place to be of course is short; heavily short into this melt. I did get off some shorts yesterday morning but got to cute and cashed in late in the day. Definitely too early given the way the futures look this morning. I hope that you took my writings to heart this week and saved yourself some pain as pain is what they are dealing out today. They are taking the price gains back to zero for the year. It's August and though the bear is a bit early for winter, he's definitely strutting his stuff today. As for my particulars, I'll look to average into precious metals in a melt, but have no desire to work any other long trades.

Futures have stabilized and actually picked up a bit since I started this piece, bond are moving back towards flat. The dollar is gaining strength and the Yen also. Note the Yen has been a great indicator of late. Oil is down half a dollar and the spot metals are down a percent across the board. Overnight grains showed strength. I would stay away from risk here as much as you can. Fast markets can cut you faster than imagined. If you play, you have to play smaller.