A WELCOME RALLY

A welcome rally for bulls and in some cases bears as it allows them to reload short positions. In any case I feel this rally may be very short lived considering the economic data releases on the horizon . Producer Price Index and retail sales tomorrow along with the New York manufacturing report. Consumer Price Index and and Industrial Production reports on Wednesday with Housing Starts and the Philly Fed survey on Thursday followed by Option Expiration on Friday. This will be one busy week and probably highly volatile. I am already excited !



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.

Pre Market Analysis

Fasten your seat belts. We are going to be in for a bumpy ride. The markets across Asia and Europe are all down big. There is talk that the US is entering into a bear market.

Countrywides stock is plummeting this morning after is said it faces 'unprecedented disruptions.' due to the credit crunch. If CFC falls under $20 it will be an absolute steal. They will make it past this subprime turmoil.

More talk of hedge funds liquidating positions as the worldwide financial turmoil is affecting firms black box strategies. Quant hedge funds- those using statistical computer generated data to trade positions, are not prepared for the current state of the financial market and many of these funds are falling apart as I write this.

This morning I'm preparing to play things as they come. Just for the record, I had a dream last night that the Dow fell over 1000 points. While I am not suggesting this will happen, I am including the possibility of it happening in my gameplan for today. 13,132 and 13,000 are levels on the Dow I am looking at to reduce long exposure and add to the short side if they fail. The first 30 minutes are meaningless. Might add some SRS and SKF for protection. I would not be surprised if we actually have a test of last Fridays lows and reverse to close positive. On the other hand a plunge below may mean a test of 12,700. The S&P is sitting on its 200 day moving average at 1453. Another level to look for is 1427. Below that and 1400 could be tested. Gold is up this morning which is a positive sign. Whether it says up waits to be seen.