We are living through insane times, but I think this is generally what's going to happen over the next month:
ONE: The markets will bounce higher. The reasons for the bounce will be an extremely oversold condition, the eventual passage of some kind of "bailout" bill, and the sense that the worst is finally behind us. I imagine indexes would spring, for example, back to the area I've tinted below.
And, at the same time, the $VIX will lose its unprecedented froth and sink down to "only" the mid 30s or so.
TWO: There will be a huge, huge supply of charts which had been severely beaten which do a substantial retracement back up to either broken horizontal support or, more commonly, broken trendlines. I am already amassing so large a watch list of these prospective "bounce backs" that it's ridiculous.
THREE: The new catalyst for a downturn will be Q3 earnings, as those start to emerge in earnest three weeks from now. It's going to be sort of like RIMM (although not necessarily to that extreme) for hundreds and hundreds of different stocks. At that time I plan to go hog-wild buying puts on or shorting the aforementioned "bounceback" issues.
Having said all of the above, obviously I intend to scramble out of the majority of my present positions. As of this writing (more than two hours prior to the opening), there is no "big news" yet. There's no surprise interest rate cut, although that could change at any moment, and the GLOBEX on equities have been in the green all night. I am (with the usual caveat – "as of this writing") relieved to have closed out my index put positions. I am hoping that at least the initial bounce isn't so big that it takes too meaty a bite out of my current profits.
We are living in an absolutely unprecedented era, so laying out what I think is going to happen over a month – – which in current market conditions is like predicting what's going to happen over the next fifty years – – is highly speculative. But that's the general theme I'm running with for now.
