I discovered that I had written a post in early January 2009 which I never published; I accidentally left it in draft mode. I've decided to publish it here, mostly as a comment cleaner, but also to dig up what I was thinking about a couple of months ago, for whatever it's worth………I notice that my short suggestion of ARE was pretty danged good…
It's quite obvious to anyone watching the market that the explosive movements were a phenomenon of October and November 2008. Trading in 2009 is going to be much more of a slog, and it will be harder to make big money. That's why, slog though it may be, the market deserves more of our attention than ever, because there's still milk in the cow. We just have to know how to squeeze.
Take a look, for example, at the chart below. You can see the big plunge from September 19th through October 24th, and after a rapid, week-long climb, there's another plunge terminating November 21st. Ever since then, it's been one minor crossroad after another. The moves have been muted and choppy. Those making consistent missteps are getting chopped to pieces.
I highlighted the pink area above for a reason. As much as I enjoyed the big drops on Wednesday and Friday of last week, we have to keep our eyes open for (yet again) some modest strength at these levels. The only reason is that the highlighted range represents decent support, and the "escape" from this zone due to the Santa Claus rally validates how relieved the market was to escape it. To be sure, the entire issue of the "credit crunch", indicated by the dramatic easing of the TED spread below, has taken a back seat to the more fundamental issues of crappy employment numbers and an earnings season which is unlikely to impress anyone.
Taking a look at the Dow 30 average, the ride from 9,000 to 8,600 was pretty fast, and it's apparent how formidable the retracement at that level is (exact value: 9,042.08). This is the last week of the Bush administration, so it'll be interesting to see, psychologically, how much of a lift the 1/20 inauguration provides. I've been saying for months now, nothing would be better for the bears than an honest-to-goodness rally. As it is now, the market is struggling like a sick cow.
The broader Russell index is a fine example of the recent chop. Just look at the activity from November 21st: there are ten distinctly different swings in price action: huge up, down, up, down, up, down, up, down, up……….and now down again. If you asked a third grader what was next, "up" seems to be the next logical step, unless something forceful breaks this sickly uptrend. The line at 521.46, which repelled prices last night, is the next logical hurdle.
Ah, and my old buddy gold. I remain relatively bearish (I guess 7 on a scale of 1 to 10), but this bugger is being stubborn. A break below 253.73 on the $HUI would set things in motion nicely.
I got prematurely excited about energy based on the strength earlier this week, but the failure to bust through the line at 88.15 was all it took to send prices softer. Equities, gold, and stocks are all wrapped up in the same conundrum – – – they want to go higher, and the market has been slowly pushing that rock up the hill – – but people are so freaked out by what's going on that there are simply too many eager sellers to let the buying build a head of steam.
I'm just trying to keep my eye open for good positions on either side. ARE, shown below, is a prime example. I would want to be short this stock, no matter what the Dow does.
Even though I've got a mix of long and short positions, it's evident to me that the "personality" of my holdings is definitely bear-friendly. Because on up days, my portfolio might go up a little (or down a little), but on down days, it soars higher, although the move is somewhat attenuated by my long positions, obviously. In any case, I still remain hedged, and I think it's going to be a while before I get heavy-bullish or heavy-bearish. This is still very much a trader's market and has little room for dogma.
