Monday, March 09, 2009

Another Down Monday

Top Line: Don't get discouraged by marginally lower prices. As this is the best buying opportunity we have had a quite some time, lower prices simply mean that you can still buy some good values.

Tuesday the market got an early jump after starting poorly. The buyers seemed to have jumped the gun a little seeing as how the market promptly made them losers over the course of the day. Some of the financials were up today if you can call C going from 1.03 to 1.05 up 2 cents but the press will tell you 2%...right.

The problem with these small stocks, like C and BAC and even F, when they dominate trading they distort some of the technicians valuable trading tools. When technicians are confused by their own indicators, they don't know what it all means. We are Not talking about the proficient technical traders here at the Update, of course.

With the market down after the morning flurry to the upside, several of the top traded stocks were up on the day meaning up volume was higher than a down 80 Dow day would normally indicate. So, with decliners swamping advancers by a wide margin of about two and a half to one, the TRIN, or trading index looked too bullish and therefore was taken as bearish--which we would do normally, too, given our natural bearishness generally. However, in this case, we think the number is meaningless given the position of these once giant stocks trading at penny stock prices.

What we need to be thinking about is how to deploy our funds in a manner consistent with the upcoming rally. We don't want to chase anything especially after a rally begins so we want to make sure any cash we have is either put to good use now or kept for a rainy day because we need some ability to trade other opportunities that come along.

We noticed, painfully, that GDX fell today but not by enough to warrant any buying. It would have to drop below 30 again before we would be able to recommend a purchase there. Hopefully, you have purchased enough of GDX at much lower prices so you don't need to buy any more here.

What else can you buy? Well, the SP500 is getting to an interesting point as we mentioned last week. There are a couple of ways to play it and tonight we would recommend finding a good closed end fund or go straight to the SSO here near 14.5. We don't think it will get back to the 100 it was in 2007 but 45 is possible. Since it is a leveraged fund, it is not for everyone. We sold it back in late December near 26 and it's nearly half that now because of the leverage associated with it. So, invest carefully...always.

There are some closed end funds that are available that may provide some better, non-leveraged vehicles. Some of these funds are trading at significant discounts to their NAV which makes them excellent choices. Do some homework or read the True Contrarian who updated his website today. It's a good read.

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