Wow. I figured we would see a big bounce soon but jesus, that rally today was insane. The US market looked into the abyss and did not like what it saw. The dow jones industrial average climbed 632 points in 3 hrs to close strongly positive after having been down over 300 (see DIA above). But the party was not limited to the large caps. After dropping 24.4% since Halloween, the QQQQ traders decided they had seen enough and bought the nasdaq 100 etf up 6.1% in 3 hours (see chart below). I had been suspecting a big bounce and in fact was early to start buying tech stocks. But the move today was far more intense than I would have imagined and I think we have a classic panic bottom in place:
The intensity of this move is characteristic of a bear market rally. When stocks began to firm up this afternoon bears started to cover, panic sellers decided they wanted back in and long term investors bought stocks on the "cheap." The buying fed on itself and we got this massive bounce. Now that everyone thinks we are in a bear market, even my mom informed me that we are officially in a bear market, it is time to squeeze all the newly short till they are stopped out. The responsible investors out there have seen this bear market/recession coming for a long time and we got short last year. All the people who were late to the bear party are now in big trouble. This rally is going to go far higher than anyone expects and many will be suckered into thinking the bears are dead and the bull is back. I expect the major indexes to retrace at least back up to their 50 day moving averages, probably more. As you know, I am convinced that we are in fact in a bear market and I will be using this rally to re-enter puts, but not for at least a week or two. There will be a tremendous opportunity to short, buy cheap puts or get the hell out of this market if you still own any stocks but wait and let this rally blow your mind first. For now I am extremely bullish on this market and very happy with all of my positions. I own calls on FXI, SIGM, WFR, JASO, ICE and NYX, no puts.If you are feeling as good about this rally as I am then I thought you might enjoy some more Paul McCartney...
Who's that knocking at the door, oh my its a bull!
4 comments:
Looks like were on the same party boat lately man. Re-entered ice today, though lower strike at lod's. couldn't be happier.
Booyah, what a sweet day it was.
indeed it was!
As Friday's action shows, markets are more than a little jittery. When any little bit of news starts selling or buying like that, it's hard for me to say it is going in one direction or the other -- depends on what that day's news is. But I think the driver for the big rebound on Wednesday -- news about an effort to shore up the bond insurers -- shows a little desperation, or grasping at straws, on the bullish side, because (IMO) the idea of their risk counterparties saving the bond insurers by giving them money is absurd.
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