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Trust The Short-Term Rally
richard
blog
UPDATED
April 6, 2008: Hello Hedgers, sorry for being a bit inactive as of late…as you may already know, this month is a busy one for myself. I should be receiving an article or two from one of my guest writers, but in the meantime lets talk about how you should play the markets this week. The markets will have to correct eventually but I would trust the short-term rally for the time being. That doesn’t mean you should go all out and buy, it may look like there’s a double bottom at the moment but I still stand by the fact that we haven’t bottomed yet. Last week was filled with bad economic news yet we moved higher, I remain suspicious but fighting this run up is too dangerous. Trade smart, keep stop losses in place and stay away from shorting at the moment, you will have your time to short…there’s just too much uncertainty right now especially with all these earnings coming up.
A friend of mine, Momentum-Trader, brought up a trade to me last week. Permian Basin Rlty (PBT) has formed a large ascending triangle, it closed at an important mark Friday ($23)…keep a close eye on it because it could easily break to the upside on heavy volume. PBT could trigger early next week, attached is a chart and a few notes on PBT but please use your own due diligence.
April 7, 2008: PBT triggered today, attached is an updated chart on the breakout. I am no longer in this trade anymore as I took my profits before noon today.
In the coming week, we need to see some sort of a bull pullback in the markets if we want the indices to test resistance. We want the S&P 500 to fall back to the 50 day moving average before testing the 1400 mark. This sideways movement still favors the bulls, but after two failed attempts the bulls need a healthy pullback before pushing forward again. There is still lots of potential for upside…we could still test previous lows, but just not yet.
Richard
richard[at]hedgeagainstspeculation.com
April 7th, 2008 at 5:08 am
Although this market has been quite unpredictable I’ll have to agree that short term it appears that we may be facing a retracement. The market is desperate for any mediocre news even though fundamentally nothing has changed. The financing that Lehman brothers received was a farce to say the least. It’s outrageous how paying 7.5% yield and diluting the company’s shares can be deemed positive. Ultimately it seems that more rate cuts are to come even though they will do nothing to improve the situation of the economy.
April 7th, 2008 at 5:21 am
You’re right, it seems like bad news=good news and good news=very good news. And yep, fundamentally nothing has changed, we’re still in a downtrend…a retracement is healthy for the markets though, I think a movement upwards before heading down is something we need. Rate cuts will probably happen but I’m afraid that all this “good” news will turn into some very bad news later down the road. It’s good that the Fed is taking new fiscal and monetary actions…but it may seem all good at the moment, but I’m afraid this might all just end up turning sour.
April 7th, 2008 at 5:34 am
To most people who question why the rates cuts don’t work, the real answer to all this is confidence. When people borrow money there has to be mutual understanding that the debt will be paid back. With confidence in shambles low rates will not entice people to lend money out because the risk reward is not beneficial. Hence, I’ve said from the very beginning that rate cuts are a mistake. The US has stagflation, where there will be an economic slowdown compounded by inflation, and the best solution was to probably leave rates unchanged.
April 8th, 2008 at 5:40 am
this is my first visit to u r website and i really like the way u present the content.
first time i have seen can content also present in this way also.
gr8 thinking dude.
April 8th, 2008 at 6:53 am
i have added u r website in my blogroll and in technorati also
u can also add my website in u r blogroll and in techorati
April 8th, 2008 at 7:49 pm
Fil’s got a point there. Rate cuts do cause additional problems, but rate cuts are also expected with all these economic and housing problems. It brings a bit of hope to those people who are struggling with their mortgages and other problems.
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