Global Bear Continues to Maul

What a time for a Traders Boot Camp which was held this weekend in Halifax.

Thanks again for hosting this great event!

We reiterated the fundemental rules of trading - trade with the trend, cut loses short and let profits ride as well as reviewed key market sectors and numerous stocks and ETF's to figure out where we are and what is the best approach in this environment.

From last week those that took Warrens advise are kicking themselves now. The Dow futures were trading limit down at one point Friday as Global market continue to collapse and experience levels of volitility the likes of which have never been seen in history.

The Dow broke the wedge we were looking at last week, not a good sign for the future.

Our take away for the most part is stay away until things calm down. For those that can handle the wild volitility, stick to the short side with puts, ultra short index ETF's, or just plain shorting.

In case you haven't noticed this is a BEAR market. Although Q3 earnings are now coming out with some dissapointments the recession has really only just begun. Wait until the Q4 earnings hit the fan.

Although the majorty of stocks are well off their highs the same things could have been said a few weeks ago and the market has continued to make new lows.

Buffet says "BUY"

That is easy for him to say but who the hell has any money left to buy with?

The average person has just seen their life savings wiped out.

The rest were already so far in debt they are busy filling out forms at the bankruptcy offices.

Hey I just had a great idea!!

Why doesn't the government get the remaining banks to lend everyone money (maybe no interest for 2 years) so they can buy stocks. Then we could all live happily ever after.

Oh sorry they already thought of that before and it really didn't work out did it.

As expected the markets although remaining volatile really didn't do much this week. In fact they appear to be forming a bear flag.


If this breaks we may see 7,000 in the future. I guess we will just have to keep our fingers crossed hoping Buffet can shift perception enough to avoid another trouncing.

Peter

The Market is the Great Equalizer

Did you see Bush's speech Friday urging America to resist feelings of "uncertainty and fear" in the economic crisis.
Now there is a plan!!!
It sure didn't help in the first place telling America that is was going to hell in a hand basket in his previous speeches.
Ultimately the market is the great equalizer and will do what it has to do to put things in their proper perspective. No amount of political rhetoric will change that.

WHAT A WEEK




I was looking for 8,000 on the Dow but I didn't think it would happen in 1 week.
The real question now is has the market found a bottom???



Well here is the chart of the Dow for the last 10 years and it sure aint pretty. Five years of gains gone in the 12 months. There is not only blood in these streets but the carcasses are pilling high!!
I have had a number of traders tell me they are looking at selling naked puts after the bounce Friday afternoon. All I can say is they have bigger Kahunas then I do.
Grant it the premiums are huge but it is in no way a guarantee. My advise maybe consider a calendar spread sell the short term puts but buy some longer term one for a little protection.

Stocks

Suffice it to say our strategy of cash with some shorts has worked out well. (I only wish I was even more aggressive on the shorts but hindsight is 20/20.)
The question is what do we do now. Well as always discipline and patience are key. We need to wait for the proper signals and even then at least until things settle down keep our positions small and our stops in place.
You will notice a number of key reversal days Friday and a number of opportuniites on Monday to buy Fridays high as a test of a rally.
Personally I am still straddling the market. I have been able to roll this over a number of times in the last month with gains on every position. However the premiums are swelling now and the success of this strategy may be limited now.

ETFs

XLY - KRD
XLP- KRD
XLF - KRD
XLK - KRD

I think what we have seen is the end of the 3rd wave in most things and that we will be entering a time of contemplation. A 4th wave that will last for some time.
But remember anything can happen.

Peter

Rescue Bill Passes, but Stocks Sell Off as Economy Slows

That really does sum up this weeks action as headlined this weekend in IBD.
Rescue Bill was signed but US cuts 159,000 jobs in Sep.
The US economy is in trouble and we know how to profit from that!!
Of course we also no that this has been a reality for some time now. It was a year ago that the Dow topped out and has been deteriorating ever since.
Friday saw new lows with little support in the near term.


IBD 100
Even the IBD 100 stocks took a shit kicking last week and the over all quality of these best picks is no longer what you would call superior.
It is like picking from your cleanest dirty shirts instead of a new clean one.
Looking over the 100 stocks there even appears to be some great short candidates. Now that is bad.
ETF"s
The ultra shorts were obviously the big winners this week with most earning 20-30% returns in one week!!!!
Commodities
It is not only the financials taking a hit here. The commodities peaked a few months ago. (Remember when oil and gas were going to keep going up for ever)
New lows in Coffee, corn, cattle, copper heating oil, soybeans, cocoa, wheat, lumber, orange juice, cotton, platinum and natural gas.
Wachovia
You have got to love Citigroup sulking over losing that battle. You just know that the Wachovia shareholders are getting Royally reamed and the Fargo team is laughing all the way to the bank. (They will now be able to get a bigger piece of that bailout windfall no doubt)
This week
Again you just got to be riding the short side until there is any sign of a bottom here.
Still straddling the market for short term spike from the idiots willing to buy into this charade.
Watching gold closely for resumption of up move.
A COUPLE OF SHORTS FOR THIS WEEK:
THOR
ENER


Peter