Top Line: The second day in December tries to balance the first with the Dow gaining back some of the losses. With the very negative day on Monday, Tuesday needed to "shock" the bears which it seems to have done. More upside on the way...
Monday's loss seemed to be an over reaction. Now, it is up to the market to tell us for certain that it wants to go up. The signals are pretty clear based on the lows recorded last month and in October. Even with Monday's extreme selloff, stocks held up pretty well. You may not think so but you need to look at the prices at the lows of the last few months.
For example, GDX dropped 4.07 on Monday to close at 22.50. Ouch, that leaves a mark...but, let's take a look at the recent history. Back on October 24th, GDX opened at its 52 week low of 15.83. If it had been in existence, it would have been about a five year low. From there it rallied to 24.72 on November 5th. Then on November 20th, it traded back down to 17.59, nearly 2 points higher than the October 24th low. On Friday GDX rallied to 26.71. Dropping down to 22.50 on Monday still shows higher lows and higher highs, very bullish in our opinion.
We are looking forward to what we expect to be a horrendous jobs' number on Friday. This is the kind of thing we expect over the next few months, more bad news...but at the same time the market should continue to rally. This is the trouble with reading the news and then trading stocks based on that news. It's a losing proposition.
When we were in the thick of the news in the last two months, it's difficult to step up and purchase stocks but that's exactly what needs to be done. If you look at the times when you should be buying and selling, you will see the fear or confidence in the news. That's why the news is not helpful at the turns.
It's difficult to do what needs to be done but the benefits are cheap prices. Yes, we paid higher prices than had we waited for a while, like a week or two, but you can't hit the lows. The "easiest" thing to do is buy into the decline and begin by losing money so you can buy more as stocks go down. You don't think it is easy, right? Well, if you "miss" the bottom, then you always want the prices to go back down...because you missed the bottom you have problems buying at all.