Tuesday, January 22, 2008
The Fed has stepped in and cut rates by 75 basis points . A Fed cut at this stage is like treating cancer with Aspirin. It will have no effect.
The play for todays market is probably to cut back on long positions by atleast 50%. I am sitting on almost 30% cash with another 20% in inverse long ETFs such as SKF and SRS. I do have one silly play having gone long QLD though the losses here will be more than cancelled out by my inverse ETFs. It was fear of a bounce that held me out from being atleast 50% invested in inverse ETFs. I should have been more afraid of a day like this in retrospect. Oh well I have plenty of cash and can deploy it as I see fit. I could go long and buy quality names at a huge markdown or I could play the bull ETFs if I see capitulation. On the other hand I could throw it all into QID DDM SDS MZZ FXP or other inverse ETFs if I see things headed lower.
Friday, January 18, 2008
The same study can be done with the S&P 500 by breaking down its components. Some of the S&Ps biggest names are also part of the Dow - XOM GE MSFT T PG JNJ . Throw in CVX BAC MO PFE CSCO AAPL IBM GOOG AIG JPM C KO MRK VZ and you have the top 31% of the S&P 500. 20 stocks in total. Many of these names are also up strongly in premarket - GOOG AAPL CSCO BAC JPM apart from the Dow names we mentioned before. So again I expect the S&P 500 to start the day of very strongly and as long as these big 20 stocks stay strong, its likely the S&P will have a strong day.
Wednesday, January 16, 2008
Tuesday, January 15, 2008
This aptly titled movie could be referring to the stock market itself. There will be Blood. How true.
In after hours Intel INTC is being disembowled after reporting soft earnings and weak guidance. Futures are down by alot and tomorrow is likely to see an open a few hundred Dow points down.
Option expiration is on Friday and I do suspect we could get some upside after some panic selling to start tomorrow though I wouldn't bet on it. For all I know the wheels could really come off and we may close down 5% across the board. I really want to see panic selling amongst retail investor before I step in on the longside. Until than I continue to play the shortside via SKF and SRS.
Monday, January 14, 2008
Currently I am long QLD while betting against financials via SKF and housing via SRS though I lightened up on both these positions last week.I will look to add more SKF and SRS if we rally hard this week. Took some of the table on GLD today. I am looking for a pullback in Gold leading up to the Fed meeting. I have been long GLD from $58 with an average cost of under $65. Selling above $89 is prudent . Agriculture is having a phenomenal run as of late with my position in the agriculture ETF DBA soaring. I believe DBA will be one of the best plays for 2008.
Here is an interesting chart courtesy of Headline Charts showing a market sell signal via and S&P 10 week and 40 week moving average cross over. This signal appears to have accurately predicted the Bear market of 2001-02 and the bull market starting in 2003.
If one wants a accurate predictor of where the markets are headed, keeping an eye on what the institutions are doing is key. This chart via Stocktiming.com shows the Institutions are reducing expsoure to equities.
There are 71 technology stocks in the S&P 500. Not a single one is above its 50 day moving average. This chart below from Bespoke Investment is incredible to look at.
Yahoo is the only S&P tech stock up this year ( as of this morning). Amazing. This can be looked in 1 of 2 ways. Either tech is oversold and a great buy here or tech is weak and will continue to get weaker. I personally believe tech will continue its downtrend though the above tech names could all rally in the next week or 2 towards their 50 day MA. Hence I am long QLD which is a bull ETF modelled on the QQQ x 2 . Since the Qs are mainly tech stocks, I believe a tech rally can be played best by utilizing QLD though some would argue ROM is better since its a bull tech sector ETF. ROM however does not have enough volume for my liking. Too illiquid for me.
Friday, January 11, 2008
Thursday, January 10, 2008
The plus side is the spikes in gold and silver. GLD and SLV are looking pretty today. I can't help but feel commodities will be the way to go in 2008 as every rate cut only leads to further spikes in commodity prices. Gold and Silver along with agriculture could easily rise 30% or more in 2008.