Bears Hibernate While Bulls Fight Through Unemployment Numbers


Well, it seems as if the bears have called it quits for the time being and are letting the bulls have their fun. Not even having the job loss report by 233,000 more than the market expected can cause a bear victory for the day. I'll give you one thing, Friday's are hard to paint red.

Unemployment jumped to 6.7% from last month's 6.5%. This was 1% lower than market expectation. Many believe this is because many of the college students have just gone back to school, so they are not considered. Even though we have seen big strength in buying this week, I still feel that this trend will be short lived. For whatever reasons, this market is getting shoved up everyday despite very bad news. And I laugh at headlines like the one I saw on cnbc that say "Despite Huge Job Losses, The Worse Could Be Over." I am amazed that headlines like that exist on respectable sites. No one, including myself, has lived through the kind of downfall our economy will experience the next few years. The perfect storm that has combined is one that is yet to be seen in our economic past and to try and predict the bottom of it is pointless. I just don't think we are not even near to it.

After today, the market has proven that its going to fight this out. Now how long will that last? Graphically speaking, we could see this rally go somewhere between 9200-9500, and maybe even more. We will probably see it continue to climb up until the end of the year. Then we will hit January.

January should be an interesting month. This is the month I believe we will start to see a lot of crap hit the fan. I already know of 3 major retailers/restaurants, who have not yet announced, that will be going bankrupt Q1 2009. Even with Obama coming in, which I believe we will get a little rally before and after. But ultimately, I believe this is when the bears will wake up again.

I still feel we are very vulnerable for very bad sell off days like we saw this past Monday, which makes me hesitant to buy anything long. So I have accepted the fact that I may just continue to take some losses the next few weeks. I don't mind hibernating with the rest of the bears until the markets ready.

I have heard many people speculate that we could have reached the bottom and that the worst is over. However there are many reasons that I disagree with this. Here are some reasons why:

1) Housing market is still in the Pits
We should not be confident that anything is getting better as long as our housing market struggles. People underestimate just how important that number is. Housing values are the number one driver of consumer sentiment, because in most cases it is people's biggest investment. All across the county, most people's biggest "deal" has lost anywhere from 20-40%, depending on the market. That takes a lot out of peoples expectations. As long as our housing market remains in the gutter (which our most recent numbers have confirmed), I believe we are not done hurting.

2) Many retailers plan to go bankrupt next year
Think of hundreds of mini GM scenarios going across the country. Even though many of these retailers will not have the giant influences that the big 3 autos do, they still will do their damage. They have people that rely on their pension, and laborers across the country. With the continuing loss of small and large businesses, I don't think you can call now the bottom.

3) Commercial real estate foreclosures
This could be one of the biggest factors. Look what the initial sub prime crisis did to the market from 2007 to 2008. Well, commercial real estate is running about a year behind them. We have just begun to see foreclosures begin in the commercial market. These are going to pile up in 2009. The amount of debt that will be handed back to banks is unreal. It will be World War 3 when that happens, which makes me feel we're not at the bottom.

4) Beginning of the year blues
Historically, the stock market can have very bad months in the beginning of the year. Due to taxes, year end expenses, new years budgets and other elements, the beginning of the year can cause a blood bath for the stock market. Considering that we have just spent that past three usual bull months (except for the last week) in misery, doesn't make me think that will change when we get to the new year. Even after Obama is inaugurated, there will be plenty of things to going awry to make this market suffer.

So these are my thoughts on considering whether we have hit bottom. Although I feel that we could see a lot of green the next few weeks, I still think it will be short lived. I believe in the beginning of the 2009, the bears are going to wake back up and they're going to be hungry. So keep on your toes, get your cash in order, if you don't have a trading account, you can sign up for one and get free trades every month at Zecco.com. Also, for those that have cashed out and are waiting for definition in the market, these guys are offering a good savings account deal with strong interest and FDIC insured. See more at Earn 3.00% APY* in Online Savings.



Just to remind everyone, SRS is under $100. So see, there are many things to be excited about. It is Black Friday for the shorts for the next couple of weeks. Get them while they're hot! I hope everyone has a good weekend. Mondays have tended to be a selling day, but who knows what information will come out this weekend. Happy Trading everyone.

31 comments:

  1. Anonymous Says:

    i feel retarded for being so deep in SRS at $140. I guess I'll be trying to cost average it down this month then.

  2. Anonymous Says:

    Keep blogging you are phenomenal!

  3. D Says:

    SRS at $140 seems so far away. I'm in FXP at $84 -- which seemed like a great place to be at one point. I suspect China is cooking the books or worse, but there's no one that will stop them, so they may start to look good again on paper soon -- blatant lie though it may be.

    But I can't fathom what's wrong with SRS. Real estate is hosed, boned, *and* fubar'ed, and everyone knows it. There are still tons of loans to go bad, tons of foreclosures, etc, etc. I just don't get that one.

    FF: Where can I look at SRS's specific holdings, and find out more detailed information about it in general? Yahoo Finance has a page for holdings but it is almost empty for SRS. Is there somewhere else I can look?

  4. wotme wori Says:

    FF - thanks for a great site/perspective on things.

    D, SRS nav info on the proshares website: http://www.proshares.com/funds/srs.html. there's a csv download there somewhere.

  5. s Says:

    I know guys I can fell your pain :).I wanted to jump on DIG today and I will jump on it after February , probably.
    Yes , it's tough going SRS now like D said , nothing is plausible anymore.Who knows???Nobody!!I jumped on F today picked it at 2,65 gonna drop it really fast when it hits above 3,00.
    Got M on Tuesday , if I remember correctly , at 6,90 , sold the same day for 7,10.Got in again yesterday at 7,80 sold today at 8,20 , should've waited for the bulls to come in.Look at me , I'm a day trader , lol!!!This how I play at least nowadays.If it goes down big , I'll hold it , I still hold BAC for 17,something so.....
    On a more serious note I also think that after February and probably 3rd Q there will be a lot of bargains out there.I don't think however , as the original blogger , that the end is the near.This is the most powerful economy in the world , if we go down the others are long gone already.
    I still believe that you can probably retire next year if you play it right this spring and with enough cash of course.
    I mean , c'mon guys , do you think ppl will stop eating , bathing , buying LCD's and all that?I doubt that.
    My thoughts are to apply for big cc's in the spring , like 30-50k a cc without interest for a year , and get all that in the market and just wait for next fall.If I'm lucky I'm a Carribean citizen in 2011 :).If I loose I put stop losses at 50% on all of them and start all over :).
    Look at the big boys , BAC , CAT , BA c'mon guys these prices will never be here at least for the next 15 years.
    Just my .02 cents.

  6. Finance Fanatic Says:

    Great Posts. S, I agree with you that we probably won't see our economy hit bottom until at least q3 or q4 in 2009 (probably 2010), but I do feel the stock market will bottom out months earlier, as Wall Street tends to be a bit ahead of the game usually. I also agree that there are some great buys for the hike back up. Some good money will be made. Good insights folks.

  7. Anonymous Says:

    doesnt sound like anyone's using margins? even if those that keep avg'g down, how do u keep from the eventual/possible margin calls, if market doesnt go back up quickly? thanks ...btw, FF great blog, love your perspective and thought process.

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