Thursday, November 13, 2008

From Bear to Neutral to Bull?

I said on Wednesday that I was back in the bear den. Well, I was in there for about 3 hours. The long awaited break of S&P 840 happened and we sunk quickly to 820 (stops being hit). From there, we went almost straight up with a few back and forths but ended the day up big on nice volume.

My gut tells me that Thursday was a key reversal day and a key retest day. Once we recaptured 840, I knew that this had a chance to be a big green day.

So what did I do? I got rid of a small financial put and stopped looking at shorts. I went long the financials for trade but got whipsawed on the volatility (they were up huge today after being down huge in the morning). I also added some gold shares which were up nicely. I sold off all my US dollars this afternoon, as if the stock market rallies, so will the loonie.

My preliminary thesis is that we are entering a multi-month rally that may take us to Obama inauguration day or so, before we need to retest these levels again. My convinction in this is not high yet and I will admit that there is still some risk remaining. However, as I said earlier this week, the window for the downside is closing. I am still heavy in cash, but looking to add long exposure, provided we get some nice follow through and I can confirm my thesis.

1 comment:

rick said...

Seems like the automakers will be getting $25 billion. A reliable blogger wrote that the money will be reallocated from the retooling loans, not from the financial company bailout funds. GM's share of the $25 billion should hold them until inauguration. Then they'll be back, asking for the amount they really need - $100 billion or more. I can't see them getting another bailout, even with Barack's support.

So anyway, my point is that maybe the market will respond well to the bailout news. So your theory of a rally may be helped. Who knows. But GM is going bankrupt in early 2009 without government aid. That would be catastophic.