If you have children, this is the question asked dozens of times on any trip. Frankly it doesn't matter if the trip is 10 minutes or 10 hours.
Are we there yet? Have we found a bottom? I think we are very close to knowing that answer.
On March 6th, I wrote about "Holding the Line". In that post I wrote:
We indeed held that support level and have rallied about 1000 points. We also rallied and have held above the 50 day moving average. The first time of substance in 2008.
For the all this good news, this does not mean we are completely out of the woods. The 200 day moving average is still hovering around 12800 and depending on how you want to draw the trend lines , we have more resistance at around 13000. Finally, the 50% retracement from the Ocrtober high to the January low is around 12900. So all said and done, another critical turning point.
I have taken profits where it makes sense and raised stops. I have to believe that breaking these level will prove more difficult that one may think and volatility is in our future.
The Trade:
While I believe we are close to seeing some clear sailing, the only trade I would consider here would be either Ultra Short Index ETFs like SDS of buying puts on the indexes. The market has run a long way and the more probable short term direction is down.
Are we there yet? Have we found a bottom? I think we are very close to knowing that answer.
On March 6th, I wrote about "Holding the Line". In that post I wrote:
These support points create a Red Zone of Support from 11900 down to 11500. I think we see some consolidation in this range.
We indeed held that support level and have rallied about 1000 points. We also rallied and have held above the 50 day moving average. The first time of substance in 2008.
For the all this good news, this does not mean we are completely out of the woods. The 200 day moving average is still hovering around 12800 and depending on how you want to draw the trend lines , we have more resistance at around 13000. Finally, the 50% retracement from the Ocrtober high to the January low is around 12900. So all said and done, another critical turning point.
I have taken profits where it makes sense and raised stops. I have to believe that breaking these level will prove more difficult that one may think and volatility is in our future.
The Trade:
While I believe we are close to seeing some clear sailing, the only trade I would consider here would be either Ultra Short Index ETFs like SDS of buying puts on the indexes. The market has run a long way and the more probable short term direction is down.
2 Comments:
My money says the most probable direction for the next year or so is down. Sure, there will be some minor blips up here and there, a few sucker rallies, but I wouldn't bet the farm, or even my kid's next paycheck, on stocks going up substantially until more excess is driven from the system. This recession has been a long time a coming- let it do its dirty deed so we can get back to the business of growth.
I seriously doubt the Fed is going to let the market go down in an election year. That being said the financials are mired in a bear market which will take years to fix. Without the financials it's unlikely the market will be making significant new highs. However all the liquidity the Fed is pumping should be great for commodity positions. As long as the market isn't going to collapse then commodities should resume their upward grind. Oil appears to be consolidating in a pennant pattern. These usually form about half way through a move. The strngth in oil stocks would seem to suggest this is correct.
Of course there will be a price to pay for all this liquidity. Inflatin will eventually stifle the economy at some point after the elections and the recession will return or worsen which ever the case may be.
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