Obama Hangover - Dow Plunges Due To Continual Global Economic Strain

It seems as if reality struck a day sooner than expected. After seeing global markets reacting the way they did last night, I was surprised to see us down this morning. I thought we would maybe get a little rally today, followed by this massacre tomorrow or Friday. This just goes to show how grim the forecast looks for the next year. I am not blaming today's mishap on Obama, however, I knew yesterday's gains were a bit overzealous for the current situation we are in.

GDX actually weathered pretty well today and I was able to liquidate all my shares of AIG this morning before it got too nasty. Although I was hoping for a near $3 sale, I was able to sell at $2.30, yielding a 43% return in 3 days. Not too bad. So now, I am completely out of my long positions and will stay that way for the next month or two. Not too say I don't think we will have anymore green days. I just think if we do, they will be in result to a manipulated short squeeze or a reaction to some new stimulous plan that gets everyone all riled up again. Either way, they will be very, very short term.

I said not to lose faith in FXP, today we saw it up over 15%. SKF and SRS also saw huge gains. My large position in FXP ended giving me a pretty good day today, overall. And I believe it's going to be tough to slow this downward train.

Tomorrow, we have retail news. If it's anything close to last months, it will be bad. Consumer sediment has almost been completely wiped out and with the recent earnings reports from several retailers, I'm guessing this to be a bad month. Look for SRS to take a pretty healthy jump tomorrow, as most of their shorts are with real estate REITS. This stock is still a strong buy! I believe by January, we will see it back at $200+. With this news, we should probably see another down day tomorrow and even Friday. Our short term rally could be wiped out as soon as Monday.

It is still possible that today was a lot of profit taking. Solar stocks were crushed today, which was surprising, because with the election of Obama, (who is a strong supporter of alternative energy) you would expect a bounce. However, yesterday there was such strong gains that almost was overzealous. But don't be overly shocked if we somehow make it into the green tomorrow. People still are on this buzz of change with Obama.

Stay with your short positions, they will be what makes you a lot of money the next two months. If you haven't bought FXP, it is still a good buy. It was a lot better at $75, but under $100, it is still a great buy.

If you feel uncomfortable only in a short position, look to buy April contracts of GDX ($26) or GLD ($82), or look to get into some solar. STP is a great undervalued solar company. A few months ago, Morningstar had a 5 star rating with a target price of $92. Today, it closed at $16.35. I believe this stocks should be at $30-$40 by February. With the help of Obama's alternative energy crush, we should see strength in the big solar players. This is if you HAVE to go long. I would prefer to just hold short for now. This credit crisis we are in will most likely not BEGIN to get better by early 2010. So enjoy these inverse ETF's, because there are not a lot of guarantees in life! Have a good night and Happy Trading. We'll see you tomorrow.

2 comments:

  1. QUALITY STOCKS UNDER 5 DOLLARS Says:

    Everyone has a hangover once in a while.

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