Rally Hits Wall - More Mumbles From Gov't is Sure to Interfere

obama speechThe market took a breather today after its huge hike up yesterday, as the Dow closed down 115 points after being up several different times throughout the day. I expected a rather mixed day of trading at some point either today or tomorrow, as there were many still buying to try to catch the soaring rally mixed with those selling to pocket those big profits from yesterday, which bulls hadn't seen for a while. Today, we saw even lower volume than yesterday, which really has me wondering who's trading in this market right now? It doesn't seem to be institutions or hedge funds. I believe it's a world full of day traders...at least at the moment.

Sometimes, in the midst of these violent, bear market rallies, it is easy to forget that indeed we still dwell in a bear market. It was surprising for many to see the Dow end almost 1.5% today, when just two weeks ago we were down over 1.5% almost on a daily basis. It is during these times I continue to remind myself of the actual, fundamental problems that exist in the economy and rely on those measures to make investment decisions instead of what is going on with CNBC and government press conferences.

Of course there needs to be an awareness and recognition for government intervention, as history has shown us, they can cause quite an uproar, for better or for worse. So, I make a lot of my decisions, currently, based on a collage of indicators and trends. So far it's been working pretty well. Since I'm on the topic, lets discuss the important data coming forward this week.

Tomorrow, we are getting new home sales reports, which are important, but I believe will take a back seat to all the other media noise going on right now(unless of course we see a really significant number). Then Thursday, we have the GDP report. This one could cause some rallying, as a lot of indicators are based on GDP levels. We saw a horrible number last time around, so it will be hard to top our previous number. However, I still think there will be more sever GDP decline in the future.

So make sure to factor those into your research, along with all the government news. President Obama spoke tonight, trying to convey his confidence in our ability to overcome this crisis. To me, the speech seemed like a campaign for his new "budget", more than a economic update. I don't see much of a response from investors based on the speech tonight, even though after hours are slightly up, but you never know what Bernie or Tiny Tim might have in their pockets.

I made yet another move today. I pulled the trigger on some more FAZ call options with my Zecco.com account (which have great option prices by the way), that I had previous bought last week. They got as low as $4 today in early trading (which is where I got in at) and I felt that this is a great price to lower my basis. Still, nothing significant, but enough to create some cheers for profits. The option closed above $5 by close, so already that's working for me. I am not worrying about this option, as the contract expires in July and as we have seen with FAZ and the past two weeks, it can cover some big ground in a little amount of time.

SRS did very well in the second half of trading, ending up over 10% today. I had a feeling there would be some rebound from its 31% loss yesterday. This is why I ended up buying some yesterday, even though I feel that there may be some rally left. If we see it up yet again tomorrow, I'll begin pocketing some profits. I can't get greedy right?

Today's halt of the rally was indeed significant, but not by much. Proving to keep the market down again tomorrow is a better sign for bears. However, even after the two day halt of buying we saw on Thursday and Friday, we saw how the market responded Monday. So tomorrow's performance could set the tone of how we're going to go into Thursday and Friday with the GDP announcement. There is still no reason for me to think this rally can't hit 8000 and above at this point, so I still remain cautious on my positions.

So that's about it for today. I just wanted to mention some things regarding the chat. I have received a few complaints about the recent content of the chat. I created the chat in order to find good a good network of people, without dealing with crap like you see on Yahoo and Google boards. Please refrain from using profanity or degrading language. I don't mind the use of avatars and would like to keep them, but please use discretion in choosing one. Refrain from using girls, offensive pictures, etc. Remember, there are many people on here during the day that are in a work place and would like a safe, chatting environment. If I do see the problems myself, I will have to resort in banning. Enough with that, just keep the conversations mature and educational and we all can continue to enjoy it as a resource. Happy Trading everyone and have a good night.


  1. Anonymous Says:

    I enjoy the chat for exactly this reason, that it has been surprisingly high quality for the Internet, not prone to the typical mudslinging and taunting that you see pretty much everywhere else online. I also noticed today with dismay that the quality devolved somewhat. Unfortunately, active moderation is usually needed to maintain quality on a public site. I definitely hope the chat can continue for those who are sincere about wanting to share info and opinions.


    Interesting news