Thursday, October 30, 2008

Same Old, Same Old

Another crazy closing 15 minutes in the market today. This time it is on the upside instead of a selloff, moving 200 plus points within 15 minutes. Not much more to be said today except the Dow is trying to test the 9260 resistance level again, just have to keep watching on how far the recent rally will carry. If the rally continue to take the market higher, I anticipate the October 13, 2008 high will be a major resistance.

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Wednesday, October 29, 2008

New Development On The Dow

I almost overlooked the Dow hitting a resistance level near 9260 today. The Dow sold off nearly 400 points after hitting this level 10 minutes before the close. It will be interesting to see what the market will do tomorrow. Will it test it again and break through it or will it head toward the October 10, 2008 low.

A related development is also found on the inverted ETF, DXD. The DXD is the ultra short on the DOW. It formed a candle with a small body and a long tail today, almost an ideal hammer. This type of candle formed after a brief downtrend is indicative of a developing trend reversal with bullish implication. Another bullish implication is the DXD intraday low bounced off the 50 SMA (the blue line on the chart.) All of these bullish technical developments are indicating a potential upward move for the DXD and a bearish trend for the DOW.

I will be watching for a potential long position on the DXD (short on the DOW via the ETF.)

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It Is Just Crazy!

Even though there was no surprise from the Fed on the 1/2 percent rate cut announced today, the market still acted like it didn't know what to make of it. It gyrated between positive and negative territory back and forward until the clock strike 2:30pm, then it started to rally from a loss of over 120 points to a gain of nearly 300 points until with 10 minutes left for trading. Yes, you guessed it, the market sold off the 300 points gain plus more and the Dow ended down 74 points. Don't know how anyone can trade this market with these kind of last minute move. It is just crazy.

If you just look at the closing numbers, you would think nothing have happened in the market today. You would have concluded it was just a ho-hum day that loss a mere 74 points. The advance issues outnumbered the decline issues, and the up/down volume for the NYSE is positive while the down volume edged out the up volume for the NASDAQ. It is these deceiving stats that will trap the uninformed and lure them into believing a bottom has been made. A market that have bottomed would not be trading with a daily range of 500 points or more, and have hundreds of points selloff in less than ten minutes. I don't know about you, this market is too crazy for me. I'm still waiting for the market to signal it has bottom. In the meantime, I just go play with my gold.

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Tuesday, October 28, 2008

What Now O'Dow!

Woohoo, another 900 points rally in the Dow.

I hope you were on the right side of the trade today. If you were one of those that were shorting the market and didn't have a stop in place, I feel your pain. If you are one of those that sold your long positions prior to this rally and feeling you have missed an opportunity to make some big profits or to have avoided on taken some losses, I know exactly how you feel. I have experienced these feelings many times in the past, and they are not very pleasant. But, through the years as a student of the market, I have learned the hard way on how to minimize having these feelings by having a trading plan and having an anticipation on what to expect from the market (notice I didn't say 'avoid' because I still get caught up in the moment and violate or ignore the good trading practices and get trapped into these market events on the wrong side of the trade from time to time.)

If you have followed my blog, you probably already know my trading plan and my market anticipations. I have said in this post that I am keeping an eye for a countertrend long trade on GLD, and in this post I have stated what are my anticipations on the market. If you haven't been following my blog, then I highly recommend you to read those 2 posts before continue reading this post.

Now that you know which scenario the market has decided to play out, here are my anticipations on where the market might encounter resistance and potentially offer the opportunity to set a trade.

As you can see from the chart for the Dow (INDU), it has broken above the trendline today. To get some idea where the Dow might encounter resistance and potentially revert back into the primary down trend, I applied the Fibonacci retracement between the high made on 9/19/08 and the 10/10/08 low. From the Fib retracement, it gives possible resistance levels around 9621, 9721, 10,182, and 10,837. Using traditional classic technical analysis, one can also extract these resistance levels from previous resistance and support levels, and they are near 9260, 9794, 10,365 and 11,100. As you can see, both technique yielded similar levels.

The following charts show the Fib retracement for the SP500, NASDAQ Composite, NASDAQ 100, and the Russell 2000. I will be watching how the market react when it reaches any one of these levels for signal to go short on the market. Of course, all these resistance levels will become irrelevant if the market decided to simply turn around and head down to break below the support level established by the 10/10/08 low. Then the other scenario will be followed for shorting the market. So until the market give a signal that it is on its way to make a new low, the question remain, "what now O'Dow."

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Monday, October 27, 2008

Did You See What I Saw?

The Dow spend most of the day working itself back up from a deficit of more than 150 points. Around 1:40pm, it finally worked itself to a gain of over 200 points then the selling starts. The Dow loses over 250 points in the next 2 hours, and in the last 10 minutes of trading, it gave up over 200 points and the Dow ended the session with a loss of 203 points, the SP500 closed down by nearly 28 points, and the NASDAQ ended with a loss of 46 points. What's more revealing is what happened to these indices.

The NASDAQ finally close below the October 10, 2008 low. I believe the breakdown in tech stocks is not about the credit crisis. Instead, it is all about consumer spending and the recession. The NASDAQ seems to be indicating this Christmas season's consumer electronics sales will be weak, and businesses will be cutting their 2009 technology spending budget more than expected.

The Dow and the SP500 both closed at another new 52 weeks low, and they are still above the October 10, 2008 low. Once again, the DJ Transport confirmed today's Dow Industrial new low. Therefore, Dow Theory tell us to be on the lookout for lower low.

I don't know if you saw what I saw, but certainly today's market development was anticipated, it just happened a bit earlier than I had expected.

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Saturday, October 25, 2008

A Golden Bounce

The last couple weeks have been a big disappointment for all the gold bugs, myself included. Traditional wisdom would have bet gold would have been going up as investors are seeking safe haven to shelter from the equities market meltdown, and to shield themselves from the future inflation caused by the massive liquidity injection from central banks. Instead, gold has retreated from above $900 to below $700 per ounce during the last couple weeks. Some of the possible reasons for gold's retreat could have been due to 1) hedge funds liquidation to raise cash, 2) central banks selling to raise dollars.

Looking at the recent chart for the gold ETF, GLD, it appears to be getting ready for a bounce off the recent low level. Although the 50 day and 200 day moving average showing a bearish trend, but with the recent panick selling of equities, the anticipated interest rate cut from the upcoming FOMC meeting, investors could be shifting their money back to gold to hedge against the possible weakening of the dollars. In the past, when the dollars weaken, investors would shift their money to commodities such as oil. Due to the slowdown of the global economy and declining demand for oil, oil is no longer the preferred hedge against the weak dollars. That leave gold as the commodity investors will use to hedge against the weaken dollars.

In the next few days, I will be keeping an eye on GLD for a possible countertrend trade. I will post my trade in the comments section if a trade is made.

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The Market Whispered (10/24/08)

The overnight Dow future & SP500 future went limit down in reaction to the selloff in the Asia markets, and lot of people are anticipating a very negative opening on Wall Street, i.e. down 700 - 1000 points. Well, it didn't turn out to be as bad as many expected. The market did went down over 500 points shortly after the open, but it recovered over 200 points within the first half hour of trading. The market was only down less than 200 points with one hour left before the market close. Then the market sold off nearly 200 points in the last 15 minutes of trading and closed with a loss of 312 points for the Dow, SP500 down slightly over 31 points, and the NASDAQ loss nearly 52 points. In any other day when the Dow closed down 312 points, it would be interpreted as a bad day. But with today pre-market events of limit down on the Dow & SP500 future and global market selloff, a 312 points loss day for the Dow is looked upon as not such a bad day, since the expectation was for a lot worst.

So what did the market actually do on Friday, October 24, 2008 other than finished with another down day and disappointed those that were looking for capitulation. First of all, the major indices other that the NASDAQ still have not tested the intraday low of October 10,2008. The NASDAQ has tested twice, yesterday and today. In both test, the NASDAQ ended with a close above the intraday low. The other thing that the market has done was all the major indices closed with a new low, lower than the October 10, 2008 closing low. This is significant for those that subscribed to the Dow Theory. For those readers that are not familiar with the Dow Theory, here is a very simplistic interpretation. Whenever the DJIA makes a new high with the DJT also make a new high, then the Dow Theory state the new high is a confirmed high and a higher high for the DJIA is still yet to come, and vice versa for a confirmed new low. Therefore, with the Dow closing at a new low on Friday, and confirmed with new low by the DJT, the market has whispered to inform us a lower low is yet to come. Having the SP500, NASDAQ and other indices also making a new low reinforce what the Dow Theory is indicating. For those that are seeking confirmation of the market bottom might have interpreted the Dow and the SP500 holding above the October 10, 2008 intraday low as a sign that the market has made a bottom will missed what the market has just whispered.

Since the Dow is still trading inside this bearish wedge formed with the October 10, 2008 intraday low as the support and the trendline made by connecting the intraday high of 10/3/08 and 10/14/08 as resistance (see chart),

and with the expectation a new low yet to come, my trading strategy will be as follow:

- Wait for the market to break and close below the 10/10/08 low. If this new low is another confirm low by the Dow Theory, then go short by buying the inverted ETF for the Dow, SP500, NASDAQ (DXD, SDS, QID)


- If the market rally without breaking below the 10/10/08 intraday low, wait for the rally to hit resistance, then go short by buying the inverted ETF for the Dow, SP500, and the NASDAQ (DXD, SDS, QID.)

I will not go long on the market during the bear market rally if that is to occur. The primary trend is still down and the risk of a trap is too great at this juncture to go long. Of course, if there are good opportunities to do some day trades on some badly beaten down stocks, I will nibble on some of those trading opportunities with much reduced position size.

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Thursday, October 23, 2008

I'm Not Fooled.

This market is really testing one's patience. For certain it is testing my patience. Throughout the day, the market is showing signs it will go test the October 10, 2008 intraday low and will soon signal its intended direction for the near future. But shortly after 2:00pm EST, the energy stocks started to turn around, and the Dow rally from down nearly 250 points to ended the trading session with a gain of more than 170 points. The SP500 also rally back from a negative 38 points to end the session with a modest gain of 11 points, while the NASDAQ closed with a loss of nearly 12 points. Although this rebound in the last hour of trading might have some believe the market have bottomed, but I'm not fooled. When the Dow gaining over 170 points with declining issues lead the advancing issues by a ratio of 2 to 1, it is not a sign of a broad base rally or a market ready to turn around. So another day for the market to test our patience and test our ability not to rush to judgment on the direction of the market. The reason for the energy stocks to rally is most likely due to the OPEC meeting tomorrow to establish a cut on oil output. As I have stated in my previous post, I believe no matter what the announced cut will be, it will ended up purely being symbolic and will not prevent crude prices from dropping. There will be cheating from some of the OPEC members to exceed their quota, and that will continue to put pressure on crude prices.

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Wednesday, October 22, 2008

Not In My Backyard!

OPEC will be holding its meeting this Friday, October 24, 2008 to establish a cut on oil output in an attempt to stabilize the oil prices. I don’t believe anyone would doubt OPEC will end the meeting with no cut on oil output. The market is estimating OPEC will announce a cut between 1M to 2.5M barrels a day. Today, the price for a barrel of crude dropped to $66.75, losing $5.43. One wonder what could be the reason for oil prices to fall if an impending cut is coming. Here is a possible scenario that the market might be anticipating ahead of the meeting, and might explain why the price of crude continues to drop.

There is no doubt that OPEC will announce some level of output cut this Friday. But it really doesn’t matter what level of cut OPEC will announce, the actual output will remain the same if not more than what it is today. The cause for the actual output to be unchanged is the ‘not in my backyard’ attitude. It’s similar to all those people favor nuclear power, when a nuclear power plant is proposed to be built in their city or state, they will object and tell you that “you can build it anywhere as long as it is not in my backyard.” Similarly, every OPEC members want to cut output level to maintain the price of crude to be above $70 a barrel, but none of them (except the Saudi) are willing to take the cut because they need the oil revenue to finance their country’s expenditures. Therefore, no matter what the cut OPEC agreed upon, the Saudi has to shoulder the actual cut because it is the only member country that can afford it. Iran and Venezuela will be the most aggressive countries demanding a bigger cut in output to ensure higher prices, and they will be the least willing countries to absorb the cut. The Saudi is well aware this is not the right time to cut output and force a higher oil prices to a weakening global economy. In order to satisfy OPEC’s demand to cut output in an attempt to halt the drop on oil prices, the Saudi will agree to take the cut if the output reduction is 1M barrels a day instead of the more aggressive cut proposed by more radical OPEC members such as Iran and Venezuela. The Saudi also understand the demand destruction will be greater and quicker than it is now if the price of crude is kept too high. So at the end of all the talk about output cut, the announced number will only be symbolic, a show of desires but not wills. The 1M barrels cut agreed by Saudi Arabia will only bring the supply and demand closer to balance. But as Iran and Venezuela keep pumping more oil exceeding their quota onto the world market to generate the necessary revenue to meet their country’s needs, they will continue to put downward pressure on prices. As prices continue to decline, the supply of oil will continue to rise due to those OPEC countries that need to sell more oil to make up for the lower prices in order to maintain a level of revenue. Their action will push the price to the $30-$35 a barrel. At this price level, which is near the Saudi’s breakeven level, the Saudi will then exert its power to force the OPEC members to cut production or it will glut the market with oil and drive down the prices that will cause great economic and political pains for other member countries. I believe this could be a scenario the market is anticipating, and that is why the price of crude will continue to fall until it reaches that critical price (whichever it may be.) This scenario is not new. It has happened before, and it will happen again in the future. Let's wait and see if this scenario will play itself out once again.

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Stay Tune.

Another wild day in the market today. The market closed with the Dow down over 500 points after being down nearly 700 points with less than an hour before it closes. The SP500 didn’t fare much better, it closed down 50 points below the 900 level, and the NASDAQ closed down with a loss of nearly 81 points. Advance and decline ratio was 5 to 1 favoring the decline for both the NYSE and the NASDAQ. And looking at the up/down volume in the NYSE, 52M up vs 1.46B down, that is 27 to 1 ratio in favor of down volume. For the NASDAQ, the ratio is much better but still leaning toward the down side with a ratio of nearly 7 to 1. Today’s closing level bought the SP500 and the NASDAQ to close below the October 10, 2008 close. While the Dow is still above the October 10, 2008 close, this still doesn’t mean the worst is over and the market has bottomed. So stay tune and keep watching for the market to signal its bottom.

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Tuesday, October 21, 2008

Still Waiting.

Another up and down day in the market. The major indices tested the trendline and backed off from it today, with the Dow ended down 231 points, SP500 down 30 points, and the NASDAQ ended with 73 points loss. I'm still waiting for the market to signal that it has bottomed.

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Monday, October 20, 2008

What Will Tomorrow Bring?

Today the market was much less volatile while it gained over 400 points for the Dow, nearly 45 points for the SP500 and close to 59 points for the NASDAQ. The advance/decline ratio for the NYSE is 5 to 1 and 3 to 1 for the NASDAQ. Volume was on the light side, but the up/down volume ratio was fairly positive, 6 to 1 favor the upside for both the NYSE and the NASDAQ. Today's gain from the major indices put them closer to break above the trendline. With recent market behavior, who know what will tomorrow bring, a breakout or a breakdown. We just have to continue our watch for the market to signal which direction it will take.

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Sunday, October 19, 2008

What's Next?

Here is what I'm watching. The charts I have put up for the major indices look very similar to each other. Each one of them are in a "what's next" state. They all can come down and test the October 10, 2008 low or break above the trendline and move higher than the October 13, 2008 intraday high. Where the market will headed will depend on what the market decided to do...test the recent low or break above the recent high.

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Friday, October 17, 2008

I Wish You Well.

Another wild day in the market. Down nearly 300 points, up nearly 300 points, then closed down 127 points for the Dow. Clearly it is not a sign of a market that has bottomed when it exhibits daily volatility ranging from 600 to more than 900 points.

While the market is still trying to find the bottom, the New York Times today published an editorial written by Warren Buffet cheering the American people to buy stocks now. In the editorial, Buffet admitted that he doesn't know if the market will be higher next month or next year. All he is saying is he is buying while everyone is fearful, which is a correct characterization of the current market sentiment. I don't disagree or agree with Buffet's timing, but I do not find it to be the right time for me to start buying stocks for the long term. In Buffet's strategy, he is buying for the long term, 5, 10, or 20 years. By having such a long term investment time span, he doesn't care if the market won't bottom until it drop another 2000 points, and it won't be headed higher until another year or two from now. Even if the stocks Buffet bought end up losing 10%, 20% or 30% in the next year or so, it wouldn't make any difference to Buffet's livelihood. But if you are one of those people that only have a modest six figures amount in your investment and/or retirement account, and if you are facing retirement within the next 5 to 10 years, or having to put a child through college within the next 5 years, then you need to consider your future financial needs very carefully before following Buffet on buying stocks now. You need to ask yourself what if the stocks you'll be buying will drop 10%, 20% or 30% in the next year or so, and how these drops in stock prices affect you financially. In the case for Buffet, even if he lose $200 millions from his $400 millions account, he can afford to wait it out, will you have enough time to recoup these losses before your retirement or to put your child through college. Don't let the current stock valuations fool you into thinking they are very attractive right now. Remember these valuations are based on earning forecast made many months prior to the current financial crisis. After the earning forecast for these stocks are revised to reflect the changing environment in the economy, these stocks might not be attractive any longer.

I wish you well with your investments if you decide to follow Buffet's action. For me, I will keep watching for the market to signal it has bottomed.

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Thursday, October 16, 2008

The Disadvantage.

What a rude of awakening today. Oil went below $70 a barrel and the ultra short ETF for Oil & Gas, DUG loss more than 16%. How can that be, one might ask (well, I certainly asked.) After checking out what the holdings are in the DIG, the long ETF for Oil & Gas (inverse of DUG), I discovered the disadvantage on using the DIG and the DUG to play the oil.

First of all, if you think the DIG and DUG is a direct play on oil, you are wrong. If you want to play the oil directly using ETF, then USO is the one to trade. The USO invest in the NYMEX future contracts on the West Texas Intermediate sweet light crude oil. Therefore, if oil prices go down, USO will go down, and vice versa. But, the DIG does not invest in oil directly. Instead, it invest in the stock of oil and gas companies such as XOM, CVX, SLB, COP, etc. And the four stocks that I just listed represent over 60% of the DIG holdings. If the stock price of these oil companies goes up, DIG will go up and DUG will go down. Similarly if the stock prices of the stock holdings in DIG go down, DIG will go down and DUG will go up. As one can see, DIG will go up and down in regardless to the actual price of a barrel of oil. Of course, the oil prices will have influence to the stock prices of the stock holdings in the DIG. But there are time that it will not. Furthermore, the percentage of the price movement also does not correlate between the DIG and the oil prices. One good example of this is what happened to the DIG & DUG today. The energy stocks rallied today, XOM gained more than 11% and CVX gained over 5%. Since XOM and CVX are two of the top weighted stocks in the DIG, these price gains caused the DIG to go up 16% and caused the DUG to lose over 16%. At the same time, the price for a barrel of oil went below $70 a barrel by moving down over $2.00. If you were looking for DUG to move up because the price of oil went down today, you were greatly disappointed.

So beware of the disadvantages if you plan to use DIG or DUG to play the oil. It is not what you think it is.

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Wednesday, October 15, 2008

Given It Back.

I wrote yesterday that the market will fade toward the recent low with some backings & fillings. Based on what has happened in the market today, it doesn’t appear there will be much of backings & fillings for it to reach the recent low. Today, the Dow closed down more than 700 points, and the SP500 a bit over 90 points, while the NASDAQ closed down more than 150 points. This is only half the story. With today’s close, the NASDAQ already gave back all of its gains from the Monday October 13, 2008 relief rally plus more. On Friday, October 10, 2008, NASDAQ closed at 1649.51, today it closed at 1628.33, slightly 11 points lower than the October 10 close. The Dow and SP500 are still little bit above the October 10 close, 126.72 points for the Dow and 8.62 points for the SP500. Unless this market reverse itself and starting a new bull market tomorrow, all the indices will give back all the gains made on October 13, 2008 plus more. As a student of the market, one has to respect the market and wait for it to give guidance. Until the market say it has made a bottom, all the intermediate gains it will acquire will be given back. Therefore, I will stay with my thesis as I have stated in my previous post until further notice from the market.

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Tuesday, October 14, 2008


Today the US announced its version of the bank bail out plan, and the bond market re-open after being closed yesterday for Columbus holiday. The stock market open up strongly with the Dow up over 400 points. Thereafter, the market started to fade and during the course of the trading day, the Dow gave back all of the early morning gain plus more. The Dow was down almost 300 points at one point, giving it another 700+ points trading range for the day. Near the close, the Dow once again moved into positive territory, but it couldn't hold the gain and ended closing down around 76 points. Although the up/down volume for the NYSE was fairly even, but for the NASDAQ, it was more like 5 to 1 on the downside. Signs of market weakness are reappearing and won't be surprise to see the market fading toward last Friday's low with some backing and filling.

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Monday, October 13, 2008

Fighting The Resistance.

Wow! The Dow up more than 900 points after practically every government in the world decided to throw money to unfreeze the credit market. The DJI, SP500, and the NASDAQ are up over 11%. It is hard to resist from buying into this relief rally. But I'm not fooled by the numbers. Most of the stocks opened with such a large up gap, unless a long position is already exist, today's gains are elusive. Having more than 900 points gain after a week of over 1800 points loss on the Dow is very suspicious on this rally's sustainability. But even if this rally continue for a few days, I need to continue to resist from getting suck into this relief rally and wait for the market's verdict.

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Sunday, October 12, 2008

The Game Continue!

Plan, plan, plan, everybody has a plan. The EU's bail out plan is estimated to cost 400 billions Euro, and US bail out is estimated (when it is all figured out) to be over 1 trillion dollars. So where are we going to get these money. Us, the taxpayers of course. But, "Oh, don't worry, these banks will pay you back when they start making money again," said our mighty government officials. Let me think about this a bit, how in the heck are these banks going to make that kind of money back to pay us back. Ah-ha, another speculative bubble! So here is the beginning of an end to the credit crisis resulted from the housing speculative bubble, and the foundation for the next speculative bubble. The game continue!

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I'll Stand Alone

With the world central banks all putting their plan together to bail out the banks and the world financial system, the Asian markets are trading up and the Dow future indicating an up opening on Monday (at least at this particular moment.) People are talking about last Friday's low could be the market bottom. I say, "maybe, maybe not." Even though if it turns out it was the bottom for this bear market, after a short rally, the market will come back down to test this low. It is at this point the market will let us know if it has indeed bottomed on October 10, 2008. If it fail to hold the 10/10/2008 low, then all these same people talking about this current bottom will start talking about the 1929-1932 market crash once again. For now, I will maintain my position and wait for the market's verdict. Until then, I'll stand alone.

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Friday, October 10, 2008

I'm Not Buying.

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!

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Why Bother!

With so much fears and volatility in the market, I'm not even going to bother on trading individual stocks. What I know is the market is unwinding and it is going down, what I don't know is how low will it go and how it will get to the bottom (the low could be somewhere in the 2002-2003 low, we won't know until the market get there.) Therefore, by buying the ultra short ETF on SP500, Nasdaq 100 and the Russel 2000, SDS, QID, TWM respectively, I will ride the trend without having to worry about the directional move of any individual stock and avoid the opening gap risk.

In addition, as the global economy is being dragged into a global recession by the credit crisis, demand destruction for oil will bring the price of oil back down to the level where it begun to run toward the speculative $150 per barrel, and that level is in the $65 range. Since the price for a barrel of oil exceeded $120, the daily US consumption has decreased by 1 million barrels a day. With the anticipation of the price for a barrel of oil to go below $80, I will buy the ultra short ETF, DUG.

As the world central banks and the Fed are pumping enormous amount of liquidity into the financial market in an attempt to solve the credit crisis. these moves will cause tremendous inflationary pressure for the future. With the panicky investors seeking safe haven along with the inflationary pressure that will come due to the expansion of liquidity by running the currency printing presses, the price of gold will move upward. To profit from the upward movement of the price of gold, I will buy the gold ETF, GLD.

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