Monday

India NIFTY Short NIKKEI Hedged

Shorted NIFTY USD$5/point at 4678, long NIKKEI 10429 223 Y/point.

Dow futures is down 80 points, with China leading the way after another down day with an end of day recovery. At its trough, China H-shares were down to 11100, but closed 11280. We intend to hold on to the trade above. We are suspicious of this pullback. Even though its high time for a significant decline, there is probably more room upside to convince all the dumb money its a new bull market. Our indicator is still off its peak (the higher it is, the better the short), and looking at the chart of our indicator, another push up is still in the picture.

JB Hi Fi continue to show strength, reaching a high of 18.14. Its CEO and directors have been unloading their shares and sold about $1.3 million worth of shares (converted options). Smart move - unload them all to the dumb money buying.

Our purchase of more Cooper Energy shares Friday at 43c (high of Friday) was timely as it broke upwards to close at 45.5c. Two reasons why we bought more Cooper:

• Good latest financial report
• Hedge against our short JBH.AX. Some suggests this hedge does not make any sense. A drop in oil price (bad for Cooper) will result in higher consumer discretionary spending (good for JB) - hence a bad hedge. Nonetheless, we are happy with the fundamentals of Cooper Energy. Cooper is at its best shape since inception with record production, record reserves and record cash. Although its share price is off its peak, its market cap is close to its peak due to the increase in the number of shares. So at 43c, its not as cheap as one would think.