I am sticking to my thesis and holding on to the SDS, QID, DUG & GLD. Today's market action is not a bottom. Although this might be a capitulation day for a lot of stocks, and the market might give us a dead cat bounce in the next few trading sessions, the problems that bought us to this juncture still are unresolved, nor a specific plan have been put forth to assure the market that these problems will be resolved. Indeed there were a lot of panick orders at the opening. After these sell orders are balanced and some buying came in on these ridiculous price level that pushed the Dow into a slight positive territory, selling resume. In the afternoon, the market rally again and pushes the market into positive territory once again. But then as the close is near, the market sold off once again to close with over 100 points loss. Granted it is much less than the nearly 700 points negative shortly after the opening bell.
The G7 held a meeting in Washington, DC today. From the statement issued after the meeting, there is no specific detailed plan on how to get to a resolution for the current credit crisis, only fluffy statement saying it will do whatever it take to support the banking system. To me, this sounds like another ugly day for the market on monday. The market seems to be expecting some sort of decisive action plan coming out from the G7 meeting. Now that the expectation has been bursted, disappointments and fears will rein the market once again.
As I see it, in regardless what the central banks decided to do, it will involve high level of injection of liquidity, thus will create inflationary presssure that will devalue everything. As the credit crisis progress through its course, the global economy will dramatically slow down and will cause demand destruction for crude oil. When the recession hit every corners of the world, people will seek safe haven to protect their assets. All of these things will point to further weakness in the stock market, lower crude oil prices, and higher gold prices. For these reasons, I am sticking with my ETF on SDS, QID, GLD, and DUG. Until the market has signaled it has made a bottom, I'm not buying!
