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goldminingXpert (28.82)

Quick Take On The Market This Morning



December 12, 2008 – Comments (16) | RELATED TICKERS: SPY , SKF , FAZ

As you probably know, futures are pointing to a rough day for the bulls today. Dow futures are -300, S&P -40. SKF is already up 10 bucks in pre-market trading. A compound effect off of weak retail sales, no auto bailout, and the hedge fund scam caused the waterfall decline. For those of us who have been steadfastly bearish for the past two weeks, today is sweet sweet vindication. The most important lesson is in all the myths we saw shattered:

1. December is always an up month.

Oh really? 

2. The bear market is over. New bull is here.

This kind of violence is unprecedented in bull markets. Bull markets are quiet and calm with gradual moves; bear markets feature violent whipsaws that shake everyone out of their positions and beliefs. 

3. Santa is coming

News trumps historical patterns. While the traditional market timing suggests that we would have been up this week and into Christmas, the torrent of bad news finally overwhelmed the bulls' best wishes. There is only so many disasters one can take before you finally throw in the towel. Thursday's news broke the camel's back.

4. Investing with the crowd is safe

A lot of people, nearly everyone I know in fact, was long the market going into Christmas. This is especially remarkable in that I try to mostly hang out with bears, as bears have been correct about the market for the past two years, and I like validating views with people who have high accuracy. That said, the bears turned bullish the week before Thanksgiving. Even after a 20% rally, the bears stayed temporarily bullish through Christmas. Result: no short covering yesterday into close or at all overnight; as there are no bears, there is no one to cover their positions and buy stock as prices decline. Plus bears hate losing money as the market drops, so they dump their positions in a heartbeat as the market declines adding fuel to the fire. When you see a lot of bears turn bullish, you need to GET OUT OF STOCKS FAST! The closing of the all-short hedge fund was a good tip off that too much bullishness had developed.

Bears, enjoy today, we've earned it. I made 800 CAPS points yesterday, with my preponderance of ultrashort picks, I'm hoping for another 800 today. 

16 Comments – Post Your Own

#1) On December 12, 2008 at 7:34 AM, dexion10 (27.03) wrote:

nice post my man.   I feel that I am collecting egregious profits today because of some unexpected bad news related to Madoff.

I will cover some of my positions today in the morning.

The auto bailout is not such a big deal to me as I felt that the market was going to SELL THE NEWS on the bailout either way.


If the bailout had been approved the market would have rallied intraday or for one day and then crashed.


This Madoff news combined with the failed bailout is an amazing turn of events for a market that had turned nakedly long.

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#2) On December 12, 2008 at 7:34 AM, TMFMarlowe (53.34) wrote:

It could turn on a dime if the auto bailout is revived... be careful out there.

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#3) On December 12, 2008 at 11:00 AM, OleDrippy (< 20) wrote:

You honestly think the big 3 won't get the money, seriously? It's not a matter of "if", it is a matter of "from whom" and "from which pocket".

Congrats on your big day. I assume you'll have another one today, but with these markets latesly I wouldn't be the least bit surprised to see us up 300 by the close....


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#4) On December 12, 2008 at 2:35 PM, BigFatBEAR (28.41) wrote:

Don't count your daily bearish eggs before they're hatched! :)

While I think that we'll retest S&P 750 sometime in December or January, today's bad news seems to have been shaken off. Unless, of course, we get an end-of-day surprise, which I've actually come to miss recently...

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#5) On December 12, 2008 at 3:36 PM, MLGtrader (31.94) wrote:

Yep, so much for that big down day I was hoping for.  Oh well, at least the market has priced in that an auto bailout is a for sure thing from the $700 Bil bailout fund.  If it didn't happen, markets would tank, like they did overnight.

We'll see come monday

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#6) On December 12, 2008 at 5:20 PM, semper77 (< 20) wrote:

Yeah, how funny is that? I would have thought for sure that this would've sent the Dow reeling. Maybe my 9500 call on the Dow isn't looking so bad after all....

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#7) On December 12, 2008 at 8:54 PM, mgiv (44.36) wrote:

looks like you spoke a little too soon.  I think there is more bear ahead of us. But if you invested into the NASDAQ bubble a year of so after the pop, you would have ample opportunities to come out ahead.

I think it is wise for the short only funds to close.  They are not liquidating all at once.  So now is the time to annouce it and liquidate gradually.

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#8) On December 12, 2008 at 10:26 PM, FleaBagger (27.43) wrote:

I sold FAZ for >$50, locking in a >25% gain in a couple of days. Thanks to you for my getting in and to myself for getting out.

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#9) On December 12, 2008 at 10:28 PM, FleaBagger (27.43) wrote:

I'm actually going to be buying ACAS. If their creditors don't start a fire sale of their assets, they should pretty easily octuple in a couple of years.

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#10) On December 13, 2008 at 12:49 AM, nuf2bdangrus (< 20) wrote:

Every time it goes down some loudmouth will cry "rescue" and the same cry recovers the market.  Then, when the market has risen and squeezed all the shorts, the big shots who need to sell will.  They know much more than we do.  It is more corrupt than ever.  I'm very light, and am going to start pairs trading...long gold and short something.

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#11) On December 14, 2008 at 2:37 AM, craftmacaroni (81.92) wrote:

Yes but the market turned in the middle of the day. I think it seems less volatile now -- like people are pricing in much worse than they got even with the horrific news on the job front and auto front, it slowly moves. At some point the valuations look compelling. At some point the forced liquidations are over. And there is ample news suggesting that there were massive forced liquidations of hedge funds and other Ponzi scheme managers (highly leveraged) that compounded the selling. The market seems to  be stabilizing. 

Market psychology seems to respond well to having a new team in Washington -- serious people who have an understanding of economics and a serious approach to regulation and aren't pushing an ice cream and cake economy. There will be inflation with these policies but that's better than the alternative.

 Like Buffett says, if you wait to see the robins spring will have already come.  

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#12) On December 14, 2008 at 10:22 PM, d1david (28.65) wrote:

Barring any news about GM, I think Monday will be an up-day- Tuesday the feds might lower the rate to zero and the market might rally all day monday in hopes of that...

be careful shorting the hole now.. especially if the market rallies above 900 and then 915, if it breaks 915 look out..   if it does- i think shorting over 950 would be a decent trade 

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#13) On December 16, 2008 at 9:01 AM, Gemini846 (34.90) wrote:

If you had several financials you wanted to short would you do it now or wait until after the rate cut? The traditional 'don't fight the fed" thoughts say wait till they spike up then short tomorrow.

In the new market the rate cut is factored in and will blip up for about and hour and crash in the afternoon.

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#14) On December 16, 2008 at 12:23 PM, d1david (28.65) wrote:

gemini.. whatever you do.. you wait for a CONFIRMED trend after the meeting..... otherwise the whipsaw will kill you

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#15) On December 16, 2008 at 8:10 PM, d1david (28.65) wrote:

I wish I would have heeded my own advise.. shorted at 900 when it looked like it was topping, then reshorted at 908... bad move

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#16) On December 17, 2008 at 9:03 AM, Gemini846 (34.90) wrote:

We ended the day at 913. I waited. We could open up or down this morning but this should be a down day. I don't think the volume was there for this to be a sustained rally.

Hey Ben... the last 3 Jolt rate cuts didn't work. Put the economy in a body bag.

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