Quick note on today…8/29/11

We think there is overwhelming evidence via the regional manufacturing surveys already released in August that the ISM due to be released 10am on Thursday will be below 50 representing a general contraction in US manufacturing. This will be the first below 50 print in almost 2 years. This is bad.

The euphoria today(index’s up 2%+) looks silly to us. As such, we are shorting the index’s and will see what happens by the end of the week.


One Response to Quick note on today…8/29/11

  1. 1689capital says:

    Following up on this trade…

    Well it’s the end of the week and we’re happy to report an 8-9% gain on this short. To execute the idea we used UWM the double leveraged ProShares Ultra Russell2000 (ETF). This is a 2X long Russell index tracker that we shorted. You could have also bought TWM the Ultra Short Russell ETF for similar gains. On the ISM report we were a bit surprised that the 50.6 overall print wasn’t a bit lower but we think the thesis was correct and our reliance on the regional surveys did pan out. One of our takeaways from the report….

    “The Production Index registered 48.6 percent, indicating contraction for the first time since May of 2009, when it registered 45 percent.”

    We ended the day Thursday even to slightly up. With the BLS NFP payroll numbers coming out Friday morning we felt very confident sitting on our position. And the NFP was terrible. Literally staling as there were 0 net payroll jobs added. On top of that, the July and June numbers were revised lower by ~55K. There’s a good chance we’ll see some risk off trading again next week after the holiday and prior to the Obama “grand plan” speech but we’re locking in gains today. The leveraged ETF’s are good for short term news driven moves but they shouldn’t be used as long term trades.

    Both the ISM and BLS reports can be found below. Cheers -1689



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