Stocks Fall Despite Large China Bailout, More FXP

Last night I went to check the China Index and noticed Hong Kong was up 9.5%, which made me a bit nervous, considering a large stake of my investment is currently in FXP. After investigating, I found that China had executed a close to 600 billion dollar bailout for their market. Well, no wonder. Another emotional stimulate to get people's buying anxiety back...For now, at least. With this week being a critical week for redemptions and with the outlook of retail earnings not looking so good, I believe China saw this as a must for them to try and stimulate the US market.

After realizing the cause of the large increase in China markets, I became excited to be able to buy yet some more FXP. I thought for sure it would have to be down another 20-25% today. When I woke up, I was very surprised to see the little affect the bailout had made on the market. FXP was trading down, but only at around $65. I was hoping for the $50's! Still, this was low enough for me to pick up another large stake. I know, some of you may think I'm crazy, and although this is not my usual tactic to investing, these times bring about different strategies and I don't see a lot of downside in this ETF.

The fact that China just injected $600 billion into the market and we were still down today should show where we're headed. Starbucks has already announced their lack to make earnings today after the close and there will be many more to follow. Kohls, JC Penney, and Wal-Mart are still to come this week, although I believe Wal-Mart will weather pretty good. Having FXP hover in the low $70's for most of the day should show this ETF's resilience. More and more people are beginning to recognize the value of these ETF's as we are seeing trading volume shoot up.

Circuit City made their official "Chapter 11" announcement today, that we knew was coming six months ago. Like I said a week ago, there will be many more of those to come. As for longs, to be honest, there is not many I like at this point. You have your safe bets, Proctor & Gamble, Verizon, Wal-Mart, which will be fine, but are boring, in my opinion. But these next few months, I do not see a lot of green for most companies. I do still like GDX (was up 6% today), SLV and DIG, since I believe commodities have taken too much of a beating recently. Plus, with Obama coming in and shutting down all of the domestic drilling, oil should gain some ground again.

I felt like we could maybe have a rally this week with redemptions on Friday, but today's resistance has made me think otherwise. I believe there is still a lot of market manipulation going on with the hedge funds, so don't rule out a rally yet, but that should lessen after this week. All the inverse ETFs look good. SRS was up 20% and SKF up 10%. SDS and QID are both great buys right now. If you have to go long, right now I would suggest cash, or short term treasury funds (CPFXX or WEOXX). And if you still want to play with Apple or Rim (which are still great companies with good fundamentals), try to at least buy April or May options to give you some flexibility, because there is still good volatility with them, but I would wait until after the holidays for buying retailers.

I am guessing that my FXP buying days are done. Like I've said in previous posts (and I'm sticking by my word), I believe FXP is a $140+ ETF by December/January. It will continue to have its ups and downs until after the holidays. China businesses are struggling, worse than the US. Once the bailout high dies down, they will have a hard reality check. The Government cannot bail out everyone. If GM goes BK, we could see the market hit a new bottom in one day. Unemployment is still on the rise and so is deflation. This mixture was a big contribution to the Great Depression.

You don't have to be depressed and lose money during this financial crisis. Play the bumps right and right now, it's hard to lose going short. Happy Trading and we will see you tomorrow.



    Markets are totally unpredictable.

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