Just In The Nick Of Time

It’s not perfect and nothing really is in this market, but the upside down head and shoulders could have been completed today.  The market rallied right on cue today.  We had a jobs report this morning that stunk.  We all knew it would but I mentioned on my radio show this morning that the market had a 67% chance of rallying today.  How did I get that figure?  Here were the 3 likely scenarios I laid out:

  1. Jobs number worse than expected, market falls 
  2. Jobs number better than expected, market rallies hard
  3. Jobs number worse than expected, market rallies anyways

Well.  We got number 3.  The data was very ugly but the market immediately ignored it and we went up.  The Dow finished up about 250 points after trying to sell off late in the day.  It wasn’t the strongest day in the world.  However, the market ignored bad news.  That’s a good sign.  Remember, it didn’t ignore bad news the last two days.  It sold it off hard.  Did we rally because we had this technical pattern?  Did we rally because people are optimistic Obama’s economic team can fix some of these problems?  Did we rally because the market has already priced in bad news from the economy?  I’m not sure the reason but it was right on cue.

Ending the week with a nice gain was the just the prescription for a nice weekend.  We had a nice rally followed by profit taking and a rally that prevented us from going to the old lows (at least for now).  

I bought some mid cap stocks today in a pretty aggressive way in the morning and that may turn out to be a quick trade.  In this environment, sometimes you have to trade quicker than we usually do but that’s what the market is giving us.  

I want to say thank you to everyone who came to our strategy session in Houston last night.  I enjoyed meeting many of you.  It was a very crowded event with standing room only.  I think everyone there got some good information about what we see going forward and the opportunities that are in front of us right now.  The event was so full, that we have the overflow strategy session Tuesday night.  It’s a free event with Daniel Frishberg and myself.  But, it will fill up quickly.  If you want to register, go to http://www.bizradio.com or call 1-8778-BIZRADIO.

Have a nice weekend.

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3 Responses to “Just In The Nick Of Time”


  1. 1 Chris C. Courtney November 10, 2008 at 10:07 am

    Market rally on bad news was indeed welcome.

    Where do you suggest placing stops on the mid cap trade(MVV)?

    Enjoy the commentary.

  2. 2 greg hills November 10, 2008 at 11:42 am

    Karl,
    I enjoy the show.

    This morning you contrasted bond funds and individual bonds stating that in an individual bond, the principal will be returned as long as the bond does not default and the investor holds to maturity. I concur.

    You went on to say that this is not the case in a bond fund. I’m not sure I agree with this and would like you to help me see the logic.

    I thought as long as you held the bond fund long term the same principle should be returned to the fund. If investors flee the fund when bonds have been devalued such as today, they get a reduced NAV because the fund is valued daily at the Total Value of the Bonds/# shares on that day. (ie individual bonds go down by 5%, fund goes down and redemptions are at the lower price, but it does not hurt the remaining shareholders as long as the remaining bonds in the portfolio are held to maturity)

    If the fund rises in value based on bond value, redemptions are at the higher value.

    My question is can you provide any literature or guidance that shows the bond fund is at a disadvantage to individual bonds. Certainly the diversification in the bond fund is advantagous, but if I’m losing money due to “panic” I should be in individual bonds, because I don’t intend to panic in this market. Thanks, Greg

  3. 3 keggerss November 10, 2008 at 5:41 pm

    I think you are overanalying it actually. The simple fact is that mutual funds don’t have a maturity date or value. That’s not the case with individual bonds. In a fund, you are relying on the fund manager to buy and sell bonds at the right time. When you own a bond, the interim pricing doesn’t matter unless you sell before maturity. I’ll have more on this on my show tomorrow.


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