Dec. 3, 2008
It's time, immediately I think, to be bullish...
I keep reminding myself I don't know what is going to happen in the markets...that all you can do in this stuff is make educated guesses, define your risks (the most important thing there is in trading), put your money on the table and see what happens...and never, ever fall in love with your opinion.
I have concluded tonight that too many positives have now taken place in the world markets to continue assuming everything is going to keep heading south. For some months now, we have been lucky enough to be on the short side of a number of commodities but I now believe it is time to take most of those positions off the table...which is what I intend to be doing tomorrow.
I suspect the stock market has finally reached a level of despair that now argues for some sort of decent and potentially long lasting rally...And if this is correct (I don't know if it is), I would think a number of commodities that have been crushed right along with stocks may also begin to stage some sort of upside reversals...So, for better or worse, I think it now makes sense to generally book profits on short commodity positions and stand aside...I don't know if I am just being nervous after having been right for quite some time, but I have to go with my instincts...This may be one of those occasions where three days from now I am asking myself, "What were you worried about?", and end up right back on the short side, but for now, I just want to be out...and taking a look at a few markets as a buyer.
What makes me think the markets are ready to reverse?
1. Crude oil has now dropped $100 a barrel. THIS IS A BIG DEAL. While this may be indicative of lousy demand and a dramatically slowing world economy, there is no question the new price of oil and energy products will be a major boon to everything economic as we go forward from here.
2. Interest rates have dropped SHARPLY, with the 30 Year Treasury Bond dropping an incredible 1 1/4% just in the last month, which resulted in a 20 point rally at the same time in Treasury Bond futures.
3, Not to mention, while these two VERY MAJOR events have been taking place, the US Dollar, regarded as trash just four months ago, has rallied some 20%.
Going through the charts of the 30 stocks that make up the Dow, my objective impression is that a heavy majority of them have begun to look like they put in potential upside reversals during the last few weeks. I certainly don't know if these "looks" will hold, but considering how dismal opinion of the stock market seems to be, I was really quite surprised to see how potentially positive many of these stocks looked...
Let's face it...The monstrous stimuli being advanced by the Fed, the Treasury, and Congress WILL produce results...And the fact that energy prices and interest rates have both undergone such massive declines are both MAJOR positives for consumers and the economy...Again, as always, none of these developments has been at all anticipated by any analyst out there...nor by the markets...but I think that could be about to change in a big way...
I don't know if tomorrow we will be totally exiting our short cattle and short soybean positions but that is what I am planning as I sit here...
More to come in a few days...
I'd love to hear all of your thoughts on this...