Dow Early Close Reaps More Gains


Despite it being Black Friday and the short trading day due to the holiday, we were still able to see some gains, closing at 8829. So as a whole, we ended the week pretty strongly, thanks to some pretty influencing announcements, the bullish season, and some global support. We could see this rally continue into next week, considering the momentum behind it, especially if we begin to see some resolve with the GM fiasco. With that, it could even be a strong rally, despite the state of our economy. Those like me in some long options, should see some big gains in them if we see this aggressive bear market rally aggressively push towards 9500.

However, a new month brings new economic data, which as recent months have shown us, can be very depressing. Also, we may find some pretty disappointing numbers from Black Friday, even with the enormous price slashes we have seen this year. In any case, I believe this rally will be short lived.

China experienced some hiccups today, dealing with their central bank. As a result, FXP and EEV ended up with the bunch, which hopefully they will make a trend of. I still make my case that it doesn't matter what announcement anybody makes, if the banks aren't lending money, our markets and economy are frozen. And there are no signs of any relief anytime soon.

This bear market rally offers a great opportunity to buy into some short positions if you haven't already. It is when people believe that the worst is over and we are hit with devastating news that causes true panic. Like a thief in the night. Some people feel that we have "factored" in the bad news to our current market, so that now there is nowhere to go but up. I couldn't disagree more. I believe a lot of people are naive to the problems going on across the world. It is easy to forget, especially during this time of holiday cheer. Things that happen in the corporate and business world, usually do not effect the consumer until 4-6 months later. The news out there should not frighten us, but instead prompt us to prepare ourselves. Not only by altering our stock positions, which I talk of mostly on this site, but also altering our lifestyles, to not fall victim to this crisis. One of my goals of this site is to incorporate all aspects of being financially prepared and balanced to hopefully help you as it has helped me to find gain and stability during a tough market. You will see more of these tips as time goes on.

I did begin a new position in SRS at $120. I did not buy in too much, as I feel we may still rally into December, giving me more opportunity to load up on SRS at lower prices. In my opinion, the retail disaster that will come in 2009 will be something we haven't seen in most people's lifetime. With the housing growth bubble, many national retailers leveraged themselves very highly to try and keep up, opening numerous locations in sub par markets. Heck, haven't you seen the Starbucks right across the street from each other? What were they thinking? In doing so, many retailer's cash liquidity has been reduced to almost nothing. Having no cash in this market is a straight road to bankruptcy. As a result, SRS should continue to grow back to high numbers in my opinion. I think these effects will have strong influences on EEV and FXP as well.

Another thing to consider when dealing with EEV and FXP is the goal the US will have for the next few years to stimulate job growth. Expect Obama to give many to incentives to businesses and manufacturers for keeping their production and laborers with the US, in attempt to lower our net imports from other nations and stimulate job growth within the US. Other nations should follow suit, especially big players like Germany, Great Britain, and Russia. For nations like India and China, this could cause big problems. Much of their business comes from their exports to other nations. Due to the size of their population, this has been essential for them to continue to grow and expand. I can't see them recovering very quickly with having been involved in so many other economies. This is why I choose to short emerging markets and China. While their growth was 2 times the normal during good times, I believe it will be the same for th bad times. These are just my thoughts on the issue. Take it as you will.

In any case, we ended the week up, which we haven't seen us do in a while. Like I've said before, this may continue into next week and even into most of December, as holiday shopping usually brings out the bulls. However, try to remind yourself of our economic conditions and the things we discuss on this site when thinking of what to buy. This market is still vulnerable to quick movement swings, so try not to get greedy. For me, I finally just have to force myself to sell and take profits even though my conscience may prod me to leave it in longer. Many times I am grateful I did so. I hope everyone has had a good Thanksgiving weekend and we will see what the new month will bring us on Monday. Thank you for the donations, it is much appreciated and thanks to those that participate in the site. I always enjoy others insights and comments. Happy Trading.

7 comments:

  1. Anonymous Says:

    Hi thanks for all your insight -- just wondering what your background is?

  2. Finance Fanatic Says:

    Anon,
    I have a bachelors in finance and capital markets from the Marriott School of Management(#8 business school in the nation, voted by Business Week) and have been involved in equities and the stock market for about 10 years now. My main niche and specialty is in Commercial real estate and institutional hedge funds. This field gives me a great perspective of the financial lending markets, as well as the retail and housing markets.

  3. Matthew G. Says:

    I just started reading the site a week ago and it's exactly what I've been looking for as far as discussing how to use the UltraShort ETFs to play the market. I'm new to trading (just graduated college and have a job, luckily) but am really getting into the market. Have a new position at SRS along with you and may add to it if it gets to 90-100 and looking to get out around 180-200. When you buy SRS, for example, do you have a price point where you are looking to sell or do you just go with your gut and your estimation of the relative upside? (ex. SRS could go to new highs if REITS and retail crash as hard as you are prediciting)

  4. Anonymous Says:

    Hi,

    I have a question. What do you think of "insider trading". Can we rely on insider trading and follow the executives? For example, this web site says MSFT executives have been seling their shares until recently (Nov. 13). Does that mean we should also sell at this price?

    http://www.insidercow.com/

  5. Dave Says:

    Thought I'd share some interesting material I found while doing China (FXP) research:
    World Bank Quarterly China Report(long...)
    MarketWatch: Flaws in China Inc...
    NY Times: China’s President Cites Threat of Global Slowdown

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