Tuesday, March 10, 2009

The Rally Begins

Top Line: Well, here it comes...all the blather about whether this is it or not. The time has arrived for buying any good pullbacks and Not selling strength until we see a good move.

Today we saw the raw power of the market. When there are too many bears around, the market needs to restore the balance. The way that happens is a massive short squeeze as happened on Tuesday. What happens now?

The move today was strong and came out of no where. The possibilities are numerous but here is our thought. Remember that the market has taught everyone that rallies of all sorts must be sold. Today's rally has started to turn that thinking a little. Still, the selling thinking is strong. What we would like to see is that a good selloff occurs but can't really make it all the way back down to last Friday's lows in the Dow and SP500. Those lows should hold any further deterioration in prices.

Of course, it is possible that the market does not look back. We don't like the possibility that the market gives everyone another chance at good prices. The prices shouldn't get back to their lows of the past few days because that would just be too easy. Ok, maybe it's really not That easy. People have all kinds of trouble knowing how to trade. If a gift appears in the form of lower prices after this, there won't be many takers. They will wait until prices really move up from there.

As far as GDX is concerned, another prime opportunity was available to purchase it under 30. With some luck, there will be another chance on Wednesday. These gifts don't happen very often. There will be others but buying time is nearly over for any assets. We say that because it's extremely difficult to pay higher prices for stocks once you have seen the lows. So when GDX moves back above 30, buyers will be thinking that they can wait for another chance below 30 and it may not happen so they will end up buying it after it makes a new high for the move.

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