A Shift in Confidence Brings Reward - Watch Out For GDP

consumer sentimentDue to some measured changes in consumer sentiment and other weakening economic data, markets have seen some opposition the past few days, which continued into today as the Dow closed down again over 100 points. With deflationary indicators strengthening, my gut tells me that we should indeed start to see a rather strong turn in the markets. However, there are still some lingering elements which keep me guarded at this point. I have seen some great results from my most recent positions, with my GDX put options performing very well, as well as my DRV and UUP longs. Here's a great video talking about reasons why there should be more weakness for gold in the near future. Click Here

Both consumer confidence and new home sales came in worse than expected, which is giving investors some doubts. Tomorrow, we have the big GDP report, which is a big factor that is holding me back at this point from taking more positions. The fact is, that most likely we will see a positive number for GDP tomorrow. Now remember, GDP is measured on a quarterly basis and is compared to the previous quarter. Year over year, we will most likely still remain negative, but we are sure to get a positive quarterly move. Here are some reasons why. Net imports is a subtracting factor of GDP. As of late, we have cut imports to record lows, due to the slamming of the dollar and other recessionary problems. This should give some boost to GDP. In addition to that, government spending pushes up GDP levels, which recently we have seen record amounts of. Such factors is bound to create a slight upward movement in GDP.

With this positive number, by all means, does not mean we are out of this recession. Many times in our history we have seen strengthening quarters only to be followed by even more weakening GDP numbers. There still exists plenty of economic factors that continue to show weakness as well as a massive deflation risk that is at the door. However, as for this number released tomorrow, I would highly expect media to have a field day with it. Many analysts have already been calling that we are out of the recession and they feel that tomorrow's number will prove that. Indeed, fundamentally, it will not, but you can be sure many investors will buy into it. For this reason, I am holding back on purchasing some more short positions as I see big potential for a rally tomorrow.

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The opportunity for me is at the door. The fundamental data, although delayed, is growing stronger and economic factors are growing weaker. I plan to take advantage of this next round and hopefully make some good returns from it. I want nothing more than for us to come out of this downturn stronger, but unfortunately, I don't see that happening for a while. I will keep you updated as well as put a new podcast up tomorrow. Happy Trading.



    The economy has a long long way to go.

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