I was away from the market action for most of the day unfortunately. The indices took a bit of a pounding in the morning with a spate of violent selling that frightened off quite a few market paricipants (including this trader.)

It appears to me that the market is consolidating the gains of the past month or so and will probably trade sideways for a bit in classic bull market fashion. Bull markets are fairly boring compared to bear markets and it takes time to get used to the dull monotony that accompanies low volatility environments. In general, I feel we are in the latter stages of a cyclical bull run that will end in a few months or so when the Fed starts making noises about withdrawing the liquidity that has been fueling the incredible run in stocks and commodities since last March.

Trading yesterday was pretty miserable. Unfortunately, all of my historic posts are wiped out, but I posted a trade a couple of days ago: long DIG from the close Thursday at a price of 37.60. This trade is now underwater to the tune of $600. It’s a 1000 share position.

I’m not worried about this trade. I expect it to take a maximum of three weeks to work, obviously I hope it works sooner.

I expect oil and oil-related stocks to head higher. Please pull up a chart of TK. TK is an oil tanker shipping company. The chart for TK has mirrored the chart of every other stock in the oil sector for the past nine months. Last week the charts diverged. TK and the shippers headed higher while the rest of the oil sector declined. I expect that the oil sector will follow oil shipping stocks’ lead and go higher. Daily rates for oil tankers on the spot market hit $70K this past week. This is an increase of over 100% from the summer. The increase in leasing rates tells me that world oil demand is recovering a lot faster than the markets anticipated. I think oil is a no-brainer here.

However, as I remain vigilant about a general market correction and return to the bear market, if DIG breaks below 32 on heavy volume, I will look to exit the trade and short the indices via index puts. Conversely, on the upside I will exit my position if DIG hits 43-44.