Phew, I’m glad that my APP is doing well right now, people are starting to finally look into this stock. I’ve noticed that there are a few more bulls in this market thanks to the 50bps cut…that’s nice, but I still believe that the correction is not over yet. I would consider myself one of these bulls right now, but since the market direction is still unknown I only have 50% of my portfolio invested, the rest is in cash. The S&P should test the 1400 mark within the next week…but if it’s unable to break through that support we will be testing new lows.

Now you know I’m bullish on American Apparel (APP), but Visa (V) is another company I may be interested in.

I’m sure you’ve heard the buzz over their new IPO, but is this company worth investing in? Now there’s tons of positive comments surrounding Visa but let me list you some of the negatives first. One thing’s for certain, with all these credit issues surrounding financials, Visa will not mirror Mastercard’s past performance. Further, do we all remember the hype surrounding Tim Hortons? THI was up for a few weeks but dropped shortly after. The hype surrounding this IPO is something that I would be scared of. I still plan to play the hype as I have done with several Chinese IPOs, but my plan is to get in and out quickly…if that fails, I would consider holding the stock long-term. All in all, before buying into the hype do some research to see why they are going public and why they need to raise $10B from this initial public offering. Don’t be fooled by all this excitement surrounding this IPO and Mastercard’s great return, Visa is certain to crank up their IPO price and it may be too overvalued by the time average buyers can buy the IPO.

Richard
richard@hedgeagainstspeculation.com

By the looks of it, Wall Street expects the Fed to cut 50bps this week (2.15 EST on 1/30/08). Investors took the news of a big drop in new home sales as a sign that the Fed must lower interest rates again. But will they? And how big of a rally will we get if they do? It’s hard to say…today’s volume was ridiculously low and I fear that the market is going into Wednesday over bloated. Also, the markets have been up three of the last four trading days, and people don’t seem to be as worried as they were last week…so there is a possibility that they may do nothing or just cut .25. No matter what they do this week, I’m hoping you all have cash on hand for the big news. As a trader, you should be ready to react and pounce on any given opportunities. If the markets drop I will look to short to hedge my long position in APP.

Here is what I did today, I said over the weekend that I had mixed feelings going into Monday, but I decided to look into SDS anyways seeing as the Asian markets were in ruin and the U.S. pre-market was negative. I bought SDS in the morning…I got kinda worried 30 minutes into the opening so I decided to set a sell stop just incase the market decided to swing the other way as it has been doing for the past month.

Richard
richard@hedgeagainstspeculation.com

Just as I predicted, today’s rally was short-lived. By midday we lost all our morning gains and by the afternoon we headed towards negative territory. My prediction was spot on, so I hope you got out of any long positions in time and used that money to buy QID. I find it rather immature that some investors including Jim Cramer are calling bottoms in the market already. This correction is far from being over, the bull mentality Cramer has needs to change before anything gets fixed. Just see how wrong Cramer is, and has been in this video.

So…we may get short-term bottoms along the way, but we have yet to test the 2004 lows, and if the Fed doesn’t cut 50bps come Tuesday we will be testing those lows this week. Technically, it looks like we’re heading down on Monday in the S&P500, the NASDAQ has a similar pattern but is showing a bullish divergence. Has tech been oversold? Perhaps, but picking up some QID on Monday shouldn’t hurt you. I’m thinking of getting into some SDS though. Anyways, have a good weekend…and I’m sorry to say it, but I’m bearish in this market.

1/27/08 UPDATE: I’m starting to get mixed feelings about Monday. With so many earning reports coming out tomorrow, you need to be careful when picking a side…you don’t want to be on the wrong side of the fence. The markets can turn on you at any moment, you’re probably better off just holding cash going into Tuesday. Remember, holding cash is a position too!

Richard
richard@hedgeagainstspeculation.com

A long term investment is a short term investment that has failed. Keep that in mind these next few days if you are going long. Be very careful, tomorrow should start off green with all this good news and the futures up tonight but in these volatile markets anything can happen. We didn’t get much volume today, an indication that this rally is not very strong. Remember, we are still bearish…Fridays in a bear market are not the best, they have the ability to sell hard in the afternoons, so keep that in mind when you’re trading tomorrow. Also, as of today, we have retraced up to 50%…this is a dangerous mark, because those who got hurt are looking to take some shares off the table. I see the markets moving sideways towards Tuesday’s Fed meeting; from there we could move sharply up, or sharply down from this 50% retracement.

Richard
richard@hedgeagainstspeculation.com

“There are volatile markets and then there are volatile markets. Wednesday’s session was the latter variety, which is to say it was truly volatile.” (YAHOO! Finance)

Well put…we went from losing 300 points by midday to gaining 300 points by the end of the day, that’s a 600 point swing my friends! So I must say, this is a bullish move, one that I’ve been waiting for wayyyyyy too long. Will we be getting a dead-cat bounce tomorrow? Now that’s anyone’s guess, but this afterhours site or premarket site indicates that the markets should stay in the green tomorrow. Great, but remember…tomorrow could be another “truly volatile” day. Tomorrow’s jobless claims, existing home sales figures, and even POT’s earnings could turn this market upside down again.

Richard
richard@hedgeagainstspeculation.com