Sunday, August 14, 2011

Down on Monday, up on Tuesday, down on Wednesday, up big on Thursday and sideways on Friday…where is this going???

Last week I asked “Will we see a continued drop on Monday?”

We will did and as this (See Chart) shows we were down on Monday, up on Tuesday, down on Wednesday, up big on Thursday and sideways on Friday.

After the rally on Thursday I began to wonder, was that the bottom… it is up from here? If it was heading up what was driving it?

Well no one really knows what the market will do in the future, so what can we see from recent history?

Looking back we can see that on the road to the low of 6443 on March 6, 2009 we saw multiple “rallies”. This was on a decline from the all time market high of 14165 on October 9, 2007 (remember that?). In short order the Dow lost 54.5% with these rallies present. Well, it did not dwell at the bottom for long at all but in a mere 3 weeks it was up 20% and by the end of 2009 it was up 60%. See Chart

So back to the question, have we seen the market bottom? I think we will see additional rallies same as before as the market appears to have been oversold. Businesses are doing well, but overall what would drive a new bull market now???

With the historically volatile months of Sept-Oct-Nov just ahead we will see the future soon enough.

Here is my conclusion: Based on a recap of history we could well see additional rallies, but the trend is still downward at this time.

So what did I see in my weekend review?

IBD (Investor Business Daily) continues in their Current Outlook with: Market in Correction. 

Copernicus Systems is solidly pointing to the trend being “Down” and to be short. I looked carefully for some stocks and  ETF’s here and just did not see anything of interest

Last week I did sell AMZN and BIDU  (both are up from when I sold them) and I held onto AAPL

I scrambled to get neutral to cover illiquid holdings and bought SH (twice) and SDS (a 2x-leveraged inverse of the same). I also bought gold, first GLD and then the 2x leveraged UGL none of these are doing well but they are there for protection …to make me neutral.

Currently my "Stocks for a Trade" now consists of:
(All gains or losses shown are the total since purchase)

AAPL + 5.80%

ETF's for a trade are:

SH   -2.20%
SH   -3.99%
SDS -1.34%
GLD -2.65%
UGL -7.08%

As bad as these look they are offset.…and after this weekend review I actually may add to them.

Looking ahead I combed though the dividend payer stocks that I own, many of these held up nicely such as KO, but drops were seen in DOV, GWW, XOM, WM and CSX. These are great companies and if the market recovers they could gain 15% quickly, but it is just too soon to add more. With nothing to buy for this group, I should add protection here as well

I am not optimistic that a full recovery will occur soon and quick drops are still possible as many are on the edge…but opportunities are ahead in the future

Have a great week!

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