Click chart to enlargeWhile the charts of the indexes look absolutely horrific (Nasdaq and S&P breaking down to new lows today), we find many charts that are as oversold as they typically get.
Of course this does not signal a bottom for the market, but look at the chart of Citigroup (C) above. The fact that the moving average more or less parallels the top of the trend channel gives validity to the slope of the channel, so it isn't drawn incorrectly. Citigroup is as oversold as it typically gets. Can it really plunge from here? If so, is Citigroup going bankrupt? Can that happen? What about GE? Look at its chart... down to $15 from $20 a week ago.
We are taking that stance that any selling from here will be met with a formidable rally such that buying here represents little risk. That is to say that indexes (not necessarily individual stocks) purchased now will either rally from the current level, or return to the current level quickly after dropping. So you either profit or break even.
We're not buying unless the market drops significantly because we already have enough of a long position, but our feeling is that we may look back at this level in a few weeks and wonder why we didn't add more aggressively here.
37 comments:
If you were sitting on the sidelines in cash at the moment, would you buy some now or wait until after the jobs numbers tomorrow morning?
Signed,
Anonymous
Looks like it successfully retested the lows. I think it would benefit you to buy now.
Not so fast, Dumbya may yet succeed in what he does best- dragging down the market whenever he opens his mouth.
Don't go away mad W, just go away!
Hi Snot,
From the low BGU has moved up 5 points. Isnt this more diversified than SSO or DDM ?
AK
Oh no Snot, just a few days ago you posted that DDM was a longer term buy and hold candidate under 28 and you could've drilled 27.5 today easy!
At least you got out of FXP. And you may get another bite at the apple for DDM below 28.
Although don't take offense but I hope that you don't!
HI Snot,
Followed your advice and making money now with DDM, SSO, and I also bought FXI.
The Dow is at its height now at 280 I want to sell because of the job nos. 2moro but also scared that I will miss the hopefully continuing rally. Should I just put loss stops or sell now, and catch the lows again 2moro?
The china stocks chl ceo and lfc look really attractive and I reckon china will rally 2moro but am running low on funds.
Really appreciate your blog and learning a lot from everyone. Many thanks.
Anony
Goddess bless the PPT!!!!!!
OMG!! Only if I had the courage after I posted my short play for SRS and SKF, I would have made a fortune.
AK.
Snot,
so you will not be entering fxp anytime soon?
thebat
Hate to see the market close on a day like today. One more hour and the DOW would be up 1,000 pts.
Did we see THE bottom today?
Haynonynony
I bought UYM at 14. Pure luck... :D
I don't like this market environment, it's a casino, nothing else.
Looks like I'm the contrarian now. Bought QID at 73 near the close. We must be nearing some sort of crossroads with so many folks choosing opposite directions. Somebody posted earlier about sitting on the sidelines with 100% cash. Well...I was in that position till about 15 mins ago. We'll see. Happy hunting to all.
Anybody want to get on a real rollercoaster ride, check out MTL. Yikes!
The time of this Citi post was the bottom. Just at that point where it doesn't seem possible for things to go lower without America falling apart at the seams, it turns around. Hopefully America doesn't fall apart at the seams on one of these iterations. It truly is scary seeing C at $9 and GE at $15 thinking that the market is only just setting up for a huge drop.
We sold EEV at 82. We'd rather be hedged on the way up, but FXP and EEV just aren't the hedges they used to be. Now we're all long, for better or worse. Our goal is to get back to break even, then start to get more aggressive. Today's rally was so powerful, it suggests that smart money was behind it. If so, we could have a lot further to run up.
I sold EEV too at 104. Today when the market was down, EEV moved up slower than SDS. When the market was up, it moved down three times fast than SDS.
c was a model to hit single digits. I'm betting that the continued weakness will turn out to be as a result of the Credit default swaps. Citi has exposure to $7 Trillion worth of them. Now obviously it is impossible for them to get called on all of that but is a 1% call impossible? That would be $70 Billion and more than thier market cap.
The problem is that Puts on Citi just don't have the return potential at these prices so i sold mine at $12. Maybe i should have held a little longer (i would have made 60% more) but the risk reward just aint there anymore.
Goldman has a nice lofty price per share so there is loads of money to be made with options there if they were to keep on going down.. Also JP Morgan is a potential with exposure to a staggeing $49 TRILLION in swaps..
Sniper
Hi Snot,
I remember you refering to BGU in one of your earlier posts. From today's low, it helped me recover some of my losses as it moved almost 12 bucks where as DDM and SSO only moved 5-6 bucks. Do you consider this in your portfolio as this is more diversified than DDM or SSO ?
AK.
HI Sbbuilder,
I guess your choice of QID is a very good move given the overall weakness in the Tech. Almost every big company in Nasdaq is showing weakness and there is atleast 20% more downside in these stocks. If market is up tomorrow morning, I may consider adding some.
At the same time, given the G20 meeting over the weekend, it makes me nervous to hold anything during the weekends as PPT may get their act together and market may go up on Monday.
Snot: Any thoughts about this ?
AK.
Thanks, AK. All of a sudden I started feeling really lonely with a short position when everybody else was hoo-rah with the big gain. I'm not that worried because 1) I only allocated a limited amount, 2) tech IS weak, with no good news anywhere, 3) I truly believe this exuberance will be short lived. It is as though the market had to thump its collective chest one more time.
Also, holding over the weekend is doable because, unlike that rascal FXP and some others, there is some predictability associated with QID.
Am also looking for a good entry point to short the financials again. It looks pretty toppy right now, but there is loads of weakness left.
I guess there are two AK's now...
I like Snot's previous hypothesis that the market is oversold and needs to catch up to it's 200dma. All it's really been doing is moving sideways since the big dump in Oct. The 50dma is within sight now. A lot of bad news is baked in. But the heavy duty earnings downgrades are far from over. Question is, are all those baked in?
Hi Guys,
The Great Wall Street Casino opens in 30 mins :)
AK
I don't know about QID since I don't really follow the NAZ, but I'd be terrified to hold SDS over the weekend. IMHO we saw the S&P bottom at 818.69 yesterday.
Next stop for the 500 is its 50dma of approximately 1050.
We all love casino. Easy money...UP or DOWN
Do you guys think G20 is to provide any answers to the crises? Will China and other US debt holders be willing to invest more in US? If not, how are we going to move higher?
How can China want to invest more in the US. They got enough trouble the US market already. I think we will trade side way between 8000-9800 for DOW. Buy low and take profit at around 9200-9600. You have to take profit. This market is not BUY and HOLD.
The last time the Nas hit its 50 dma was Aug. 29. The exp. moving average has been moving down fast. So, if there is a rise to get back to it, I don't see much over-all movement. Have a look at the news this AM in the tech sector. Yes, I realize that some of this may be 'baked in', and news lately doesn't seem to correllate with the moves in the market, but over all this portion of the market is in a shambles.
Not to scare you sbbuilder, but Cramer agrees with you. He said get out of tech yesterday after it's runup.
That may mean that it's time to switch to QLD!
Testing??? Can't figure out why no comments since 9:45 AM this morning. Has this site been attacked?
Agr8gem57
Please stop posting your picture in the comments section people. Makes an unecessary pop up appear.
market just killed so many people and its crashing no one is posting or everyone is pissed?
Holy Cow! I am sorry about that pic, had no idea that was happening. I never click on "comments", always the post thread, so had not seen this before, since it doesn't show when you look at the whole thread. I went to my blogger stuff and fixed it to hide photo. Sorry again.
Watch Paulson speaks today and see where market will goes...I guess the big TANK...
I add more. the stock market will be up next week. it will hit 9500.
Busy day around here. Looks like we're in "buy the dips" mode as of yesterday's reversal. Might as well stay long until we have another reversal back to "sell the rallies" mode.
Sb, like your idea about QID. Tech is so weak. We're going to get into it if the market rallies a little further.
I wonder if Paulson's comments about the financial situation being stabilized are true. Like everyone else, he probably doesn't know for sure, but has a much closer seat to the inside action. Or - he's just taking one for the administration. "IF" the worst of the financial news is in the rear view mirror and leveling out, then the external factors are behind us and we just have to get used to the raft of horrid earnings in the coming quarters as we work our way through the recession.
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