Monday, February 22, 2010

One Last Hurrah For This Bear Market Rally

Not too much new here
Just a bear market rally
On it's last hurrah!

One Last Hurrah for the Bull!

Had family in town this weekend, hence the late post, but there's really not much going on anyway. This current rally feels like a last gasp countertrend rally that's just about out of steam.

Where we go from here should be quite instructive. I anticipate we're about to head down, potentially pretty violently, so I remain unimpressed by the move back over 1100 on the S&P. Markets were oversold, and to me, this bounce did nothing more than relieve some short term oversold conditions.

The markets are now short term overbought, so plan accordingly if you have a short time horizon.

Of course a move up to new highs would invalidate my theory here. I don't think it's likely, but it is possible, and we can't be too stubborn if the march higher does continue.

At the very least, I think it's an appropriate time to get a bit more conservative and careful in your trading and investing, as there appears to be a great deal more risk to the downside currently than potential reward to the upside.


In Case You Missed It - Recent Reading

Should be a fun week in the markets, so stay tuned here, and we'll deliver some mid-week updates and musings.

Here's a neat read courtesy of our boy Bob Prechter, as he explains how to act contrary to "market herding". Because Prechter is always aligned away from the mainstream, you'll generally stay clear of trouble following him, even if you take some things with a grain of salt.

And our friends at The Daily Reckoning put together an amusing slide show entitled The Financial Darwin Awards. Definitely worth a perusing.

Finally for those of you wondering how Valentine's Day worked out using a contrarian approach - quite well!


My Trading Activity - Still Short the S&P (Twice)

Still short baby - and for what it's worth, I think this is a fantastic time to initiate a short position.

I'm fully loaded up right now, so am content to hold tight and see which may the markets turn.

Still double short the S&P.

The S&P remains above it's moving average - but for how long?

Have a great week in the markets! Comments are always welcome and very much appreciated.

2 comments:

Kurt d said...

i agree with you on the bear market rally but I hope this is the end of it. For how long can the gov't prop up asset prices?
One other approach to your same tactic is playing the VIX. I believe it would be a good diversifier although pretty plays on the same trend as an S&P short position. And as you say, its going to come down strong and hard, which should shoot up the VIX in the near future.
heres a simple, but interesting article by the nice people at growth stock wire that offer short newsletters for free

http://www.growthstockwire.com/archive/2010/Feb/2010_Feb_22.asp?printdoc=print

Brett Owens said...

Agree with you, I'd expect the VIX to again skyrocket under our anticipated scenario.

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