Expecting A Rally

Well.  Here we are again in one of those times like the spring and July when fear went to elevated levels.  Now, I do have some conflicting indicators but the fear is high enough that I think we’re very close to getting a rally.  The duration and intensity is hard to measure.  But, I think whatever rally we have, I anticipate it’ll be a chance to short more or sell if you haven’t already done so.  I covered some short positions today but I’m not anticipating a very big rally but enough to trade. I am seeing some strength in materials stocks across the board.  Natural gas stocks and steel stocks look poised to go higher.  Again, probably a trade, not an investment here (unless hedged in the future).

In the last week, we’ve seen two 90% downside volume days.  That’s good.  If we get a few more immediately followed by some really strong up days, then I’d be changing my strategy.  But, for now, I’m looking for a relief rally that could last a week or a little more to fade.  Unfortunately, you will have to be quick.  Gains don’t last long in this market.

Income

Preferred stocks are selling off fast after the Fannie Mae and Freddie Mac news.  So, for those looking for some good income, there are some deals out there.  But, you have to be very picky and really do your homework.

Also, for those with 401-Ks holding large positions in bond mutual funds because they’ve done well and you think they are safe, be careful.  Long-term interest rates are about to rise I believe and that will mean capital losses on bond funds.  The difference between a bond fund and an individual bond is that an individual bond has a maturity date.  So, even if you have short-term losses, you already know the outcome because you have a maturity date and a pre-determined amount you will get back.

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