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BUY BUY BUY - The Stock Market is Creating Better Illusions Than Houdini
Posted On Thursday, October 30, 2008 at at 2:10 PM by ChrisQuickly, go all in. We have reached the bottom. Not so fast. In our current market, emotions are playing as a higher factor than fundamentals. But like a heroin high, it's only going to last a bit and then cruel reality will once again set in.. Yesterday, I discussed the probability of a green day, especially in Asian stocks dealing with the possibility of a rate cut in Japan. That possibility is still lingering.
Today, we officially found out we had a contracting economy(one more quarter of those and we've officially got ourselves a recession) with the GDP report, but the "bad news" was better than expected.
With that, surprisingly, came a pretty well stimulated day. Good enough that I unloaded the rest of my Apple $110 strike price contracts for double what I bought into them for. And with those proceeds I'm back in heavy to FXP at $90. Ahhh, I feel so much better now. It's like coming in from a rain storm. Getting back on the short side is so much more comfortable in this market than playing the long. Let's take a look at where we're at:
See the trend? It looks like a long hike up, but it goes by faster than you think. Let me be frank. We may see FXP cut in price even further before it explodes. This is because next week looks to be what I call a "Rave Week." A Rave Week is when there is so many things going on you don't know whats going to happen. Lets not forget the short squeeze we are feeling for the redemptions coming in Mid November. Also, elections are next week, and with Obama leading, who knows what kind of response that will cause. And of course, everyday new bad news will loom over the market trying to bring it down. We may be told next week that all are banks go under and we will still see green. We may have the best news ever, only to find red in the market. Whatever the case, there will be a lot of noise during next weeks trading. Tomorrow will be a telling day.
So why buy FXP now? Because in December, watch out! I would love to see the market rally all next week. That way, SRS, SKF, and SDS will all be prime for buying, because I believe our big, bad tidal wave is coming in December and January. The holiday season the last hurrah for a lot of retailers. When they see the horrible sales volume the holidays bring, out go the lights. We are going to see a lot of big, national retailers go under next year (my picks: Circuit City, Office Max, Office Depot just to name a few). The ones that remain will be hurting, bad. So, if I continue to see FXP drop, I will continue to buy in $10 increments. I bought today at $90, if we see it reach $80, I buy more, $70 again, etc... Remember I have a nice pile of cash of GAINS sitting on the sidelines from the past two weeks. We've got room to wiggle.
I don't feel comfortable with any longs at this point. I almost do about GDX (Gold ETF), but I like their options, when their price is below $20. With all the Federal help in the credit markets, we are bound for inflation. SRS and SKF have come down significantly, but not near as much for a buy for me. Remember if you choose to buy FXP now, realize we may not see big gains for another couple of weeks. Don't worry, the gains will come, but maybe not until late November. You may see it go down another 20% before going up again. Like I said before, this ETF is not for the faint of heart. Be patient. I hope you all are riding these waves with me. It's been a great ride so far. Just don't hate me if I'm not 100% right. I will try to be 80%. You never always know what this market will do.
I will give another special update this evening to discuss how the Asian markets are doing. Usually, we get a pretty good idea of how FXP will perform from looking at how the Asian market does. This Rally should not last long. Upcoming news will prove that. Just wait until the next job report comes out. Check back tonight for the Special evening update. Happy trading.
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