Mousetrap 1/22/2012

Secular Hold IAU & XLF 12.44%
Condition Bear Market Rally
S&P Target 1020
Hedge XLU -1.24%

Position Date Return Days Call
SE 6/27/2011 19.24% 208 Hold
CLH 7/6/2011 19.28% 199 Hold
GCI 7/14/2011 13.08% 191 Hold
CSGS 10/3/2011 25.30% 110 Hold
NLY 10/25/2011 0.85% 88 Hold
DD 10/27/2011 2.19% 86 Hold
KBR 10/27/2011 9.50% 86 Hold
VG 10/27/2011 -31.20% 86 Buy
TTM 11/30/2011 28.36% 52 Hold
BT 1/4/2012 3.32% 17 Hold

S&P Annualized -3.45%
Mousetrap Annualized 15.66%
Hedged Annualized 13.73%
Secular Annualized 19.33%

Seeking Alpha noted Friday that the Baltic Dry index is dropping sharply:

[url]http://seekingalpha.com/article/320939-baltic-dry-index-is-the-most-alarming-chart-of-the-week[/url]

Although that looks alarming, let’s keep in perspective that the Baltic Dry Index was above 11,000 in 2008 and is now about where it was at the beginning of 2009.

For the various countries in Europe, we see the same story:

France began 2009 and 2012 around 3000.

Same for Madrid at the 850 level.

Only Germany has shown improvement in the last three years.

If Europe and the Baltic Dry Index NEVER LEFT the “bottom,” then how much further “down” will they go? It’s like lying on the floor and worrying about falling. You’re ALREADY on the floor.

Germany and the U.S. continue to struggle upward, with the crisis in peripheral Euro countries both dragging them down, and propping them up as safe havens.

The Mousetrap model remains hedged, and both of my timing indicators are still registering this as a bear market rally. They are both close to reversing, but they haven’t yet, and the S&P target remains, for now, at 1020.

With massive government intervention, shorting is as unwise as being all long. Cash, or a hedged position, is still prudent.

Tim