Argh. I'm more conflicted than ever about this market.
On one hand, looking at the charts, it seems a powerful rally is about to ensue. My speculation a few days ago that energy was going to be the place to be was absolutely right. Regretably, Thursday's gap down stopped me out of most of those positions, so I really didn't benefit from the insight. But as I am looking at charts this weekend, particularly ETFs, I cannot help but see very compelling long opportunities.
On the other hand…………..looking at charts on January 2nd, it seemed everything was ready to rock 'n' roll then, too. And it was at that exact moment that things fell absolutely to pieces. So I'm concerned about missing a great rally, and I'm also concerned about getting faked-out again. This kind of market is going to force all of us to become day-traders.
I can see two "real world" scenarios pushing things one way or the other. One scenario involves a credible (to most, at least) plan from Obama for setting things straight. The market rallies, and it has some follow-through. We might be able to fight our way back to 9,000 on the Dow (at which point I'd be much more comfortable shorting). Then the plunge could begin anew.
The other scenario – which, paradoxically, is better for the bulls – – is for one more Really Nasty Plunge to take place, mopping up all this bullish sentiment and allowing us to test (but not break) the November lows. What could cause this kind of plunge? Search me…….maybe a final wipe-out of the big commercial banks via nationalization. Whatever it is, that sort of "cleansing" process would make a great time to exit shorts and really load up on longs for a multi-month rally.
If God's listening, I'd like to cast my vote for that second scenario. I would be delighted to take big profits on existing shorts, load up on longs, and actually relax for a while as the market chugged higher.
