After making the MEGA Squeeze call on US Consumer Discretionary stocks (1H09), we have reverted to the short position that we held for the better part of 2007 and 2008. No, this isn't the end of the world type call that we made back then, it's simply assuring you that everything has a price - and the price of Burning The Buck will be paid by America's Main Street.
When you burn your currency, in the short term you pay the holders of debt and assets. In the intermediate term, that reflation starts to morph into inflation. In the long term, if you're not careful, you wind up with a German Reichsbank situation of the early 1920's that is completely politicized beyond repair.
Anyway you look at it, the consumer loses - particularly as you shift from the intermediate term to the long term (i.e. Q3 into Q4). Our intermediate term view (3months or more) remains that the US market won't crash or get squeezed like we saw in 2008 or Q2 of 2009. Instead, the US market will trade in a range. We call it Range Rover, and the lines are painted in the chart below (871-954).
My new line of immediate term TRADE resistance (dotted red line) = 898. We're short the Dow (DIA) and the US Consumer (XLY and XLP). We're long the Nasdaq (QQQQ) and Healthcare (XLV).
Buy low, sell high. Manage your risk around the range.