Tuesday, March 3, 2009

The window is shut

As I mentioned last week, with the close below 800, the window was closing. It is now closed.

This happened late Friday, once we took out the 741 on a closing basis, and especially on a weekly and monthly basis with the 735 close on Friday.

Risk is extremely high and the next downleg that I had forecast for sometime in March, has clearly started. The start of this downleg was too premature for my taste (as once again, I was not able to capitalize), and I got out of my small longs on Monday morning.

Thanks to the small percentage I had allocated to being long the market and with some nice profits on gold shares that I took over the past couple of weeks, I am -1% on the YTD. Not happy with that, but I can live with it, since the S&P is down 22%.

I am now mostly in cash and looking at shorting opportunities. I am hoping for a nice sucker rally here to get that chance, but it does not seem to be happening.

Risk is extremely high as systemic risk has reappeared once again. I outlined some of my fears in my posting last week.

The first down target is 660ish and then 600. If we break these, a move to 400 to 500 on the S&P can not be ruled out. The inability of the market to rally past early January given the carnage in the fall is very ominous. My doomsday target for this month is S&P 450. It could happen as soon as mid March, which would time nicely with the Bear Stearns bottom of 2008. It may take such a ridiculous low number (roughly the starting point of the 1995-2000 bull market) to finally kickstart buying, which has been lacking even in the rally of November-December.

The good news is that if we crash fast and furious, the next bear market rally may begin, and it should hopefully be a little more steady than the one from late November to early January.

1 comment:

Anonymous said...

I think a rally is definitely now due. Of course, it will be followed by another new low simply because we're too early into the recession to be bottoming.

Based on the current and historical charts, the rally shouldn't exceed S&P 800. Maybe the beaten financial stocks will do well short-term.