Hi ,
What a time we live in ! I try to remember 74-74 and the early Reagan years but this time around the "feel" of the TAPE is as ugly as I have ever witnessed . Dating back to June 7th 2007 I noted in my Chat and blogs that the key reversal that day was the beginning of a longer term sideways to down period that would have volatility increase ( easy call it was 7-9 then ! ) and ultimately give us a Bear Market. Well that has definitely come true with VIX popping to 90 and the markets dropping up to 90% in some areas more wealth has been lost in paper terms in this time frame than anytime in this worlds history as not only are we hurting but emerging and other industrialized markets are in far worse shape than we are ! Which is why our currency is on a spaceship ride higher as seen by UUP (one of our Mainfund holdings when it was unpopular along with DUG and DTO !).
We have been searching for a bottom since our CRASH call back on September 15th in which on cue the FED came in and bailed the markets out and led me to believe it was over and we would begin sideways to up and Bull Market soon. Well I could not have been more mistaken as another more vicious leg of the Bear started shortly after a rally off the Crash warnings and took us obviously to yestedays 5 year lows.
We had to go to cash as we were lucky enough to get buy signals on the 3 major bear market rallies and went to cash with some decent profits as the rally of 20% off the bottom was a good one but the Crashes that have followed have us right back defending those lows. So what now ?
On the economy I had called a bottom in housing market 2 weeks ago saying that we will be in a bathtub type recovery until Spring 09 and then up. I have called many of the commodities especially oil perfectly without a lot of profits to show for it but we did use oil as a hedge for a while that helped us through this BEAR but now there is nothing to hide behind. Cash is about the the only place to be for our Main fund until we get a better intermediate term set up. So Our main fund is in cash for the time being.
Our Traders had a wicked start to our lengthened 4th quarter as we were much too optimistic and paid the price with some heavy losses and have been able to recently bounce back with large wins but not enough our overcome our unrealized losses but are fighting daily to get them back. Our strategy is join the herd daily now and short all rallies and buy any extremes but we simply cannot carry positions overnight unless we have a longer term horizon ....like 5 days ! It is simply a Traders market and it is unfortunate but is the hand we have been dealt by a FED Chairman whose main goal is to lower volatility and stabilize markets he has done more to make a circus out of the monetary system than Hoover ! And that is giving president Hoover the utmost respect. The open door policy of having everyone on camera daily is one traders or investors are pretty sick of and should end and let this economy and market run it's course.
Finally I am looking at the consumer....dead ...no...dying ...yes ...but with the dying there will be pockets of strength and again as home sales rose to the highest levels in 5 + years in a report yesterday maybe just maybe there is a Santa Claus after all as a recent poll said that families are actually going to increase spending this year ! With more "stimulus" on the way in gas prices as low as 1.99 in some areas and the congress wanting a vote we may get another stim pac this week ! So I am forever optimistic but short term instead of being a hero and calling a bottom I will simply let the market do that heavy lifting and enter our Main Fund with positions as warranted...I am still of the belief that the Lows on a closing basis are in but we will see more volatility until the rate cuts world wide this weekend and into next weekend are addressed and the currencies and "protectionist" fervor disappears as one that has studied these markets history does not need a isolationist approach to a world problem and signs all this year have shown disconnects that could make this bear continue....so be careful out there and let me know if you need anything 24/7 !
Member Mike Burk's Report is below and we thank him for it !
Technical market report for October 25, 2008
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