Stocks for the Rest of Us
Archive for October, 2008
Sell Into The Rally As We Approach Resistance
Oct 31st
As I mentioned in my last post I had increased my long exposure as we bounced off the old lows around 8000 in the DOW. I picked up various commodity names, some retailers, banks, and tech stocks and I’m now looking to unload the bulk of them as we approach 10000 in the DOW. At this point in time there’s really no evidence to suggest that the trend is starting to turn around and this is anything more then a bear market rally. At the very least I would consider putting on some hedges in the form of short ETFs as protection in case we visit the lows once again and approach the top of the current trading range. If you’re greedy you can hold on for a little bit longer but in this market greed will get you killed.
S&P 500
Keep An Eye On The Lows
Oct 23rd
As I mentioned in an earlier post, keep an eye on that Dow 8000 level. We’re approaching the lows once again and the critical test will take place. Should we bounce off of the old lows I will look to be aggressively long with the presumption being a multi-day snap back rally to 10000 or so. I like commodities, energy, and the banks; basically anything that’s been beaten to a pulp.
Is The Stock Market Bottoming? Volatility At Market Extremes Can Sometimes Indicate A Trend Reversal
Oct 18th
While the volatility lately has been un-nerving there is a bright side. I think we might have found a bottom. it may not be THE bottom but I think it’s definitely A bottom. We’ve finally found a level where the bulls were willing to step in and buy in a huge way. When we got to around 8000 in the DOW we saw the market rebound violently. This is good news; It’s finally a battle. I don’t know what it is or why it’s at that level but there’s no denying that at 8000 there are buyers. Keep that in mind.
I haven’t done much in the past few weeks other then a few small trades to try and make a couple bucks. My style of trading doesn’t work well in this volatile environment so I just stand aside and wait it out. Once the volatility subsides I will begin to step back in and make more trades. Right now we’re in a bit of a trading range here but unfortunately it’s nearly a 20% range on the major indices. Definitely not an environment in which stop losses are effective.
Today’s Monster Rally Is Encouraging But Warrants Caution
Oct 13th
While I didn’t publish this in my blog I actually made some purchases on Friday afternoon. Of course now I’m wishing I had bet the farm but I’ll take any gains when I can get them. I picked up some AAPL and SGR significantly lower then they’re trading now. The action today is definitely encouraging but I would urge everyone to be careful. Some of the CNBC commentators are giddy as if last week never happened and that’s dangerous. If the market has truely bottomed I expect to see us chop around down here for awhile before starting a new uptrend. This will give you plenty of time to get in if you’ve been sitting in cash. If the market can hold on to the majority of these gains and stay above 8500 or so in the DOW then we might have a good base in place. Start building a list and looking for names you like.
Shaw Group, Infrastructure Looks Good For A Relief Rally: SGR Trade
Oct 9th
SGR looks good for a relief rally trade. High volume washouts like we had yesterday often signal the exhaustion of the sellers and can lead to some decent rallies. The key to trading in this environment is staying small. The volatility will require that we use loose stops so to keep any potential damage contained we need to trade smaller positions. I’m in SGR at 18.55 with a stop at 17.60.
SGR Trade
S&P 500 Oscillator Update
Oct 8th
The market is so ridiculously oversold that it doesn’t even really matter anymore. I don’t think the chart has ever looked like this. If you’ve got a longer term time line (5+ years) now is the time to start inching into the market. I’ve personally been buying stocks for my IRA as the market has come down significantly in the past few days. If you’re trading in a taxable account then make sure you’re only using money that you won’t need for at LEAST 5 years. My gut feeling is that we’re setting up for a fairly decent thousand point rally on the DOW but it’s going to be fast and furious so unless you’re a day trader I would continue to sit on the sidelines until the charts start building a better base.
S P 500 oscillator
Ridiculously Oversold Market Could Produce a Bounce… Long SSO
Oct 8th
I took a long position in SSO today. The market is riduculously oversold here and I expect a bounce of at least a few percent. Don’t get me wrong, we’re not in the clear. When volatility is out of control the best thing to do is keep the trades small and losses contained. I’ve got a stop set at 33 just in case.
FXB Short update
Oct 7th
If anyone took my advice on the FXB short I mentioned awhile ago now would be the time to take profits on that move. I recommended shorting on strength up to the 50 day moving average and that seemed to play out quite well for us. You could have executed the same trade with the Euro and the FXE but unfortunately I failed to recognize that trade.
FXB short update