Patience Please

I know.  It’s so tempting to run out and buy a bunch of stocks when the market’s flying.  But, remember that we had a huge move last week.  The most constructive thing we can hope for right now is a weak pullback.  Low volume pullbacks are normal and healthy.  I think if the stock market gave back 1/3 of its recent gains, I’d buy that dip.  I believe at the very least that this rally will take us back up to around 810 or 820 on the S&P 500.  If we do get a pullback right now, I believe that will only add life to the rally and then we can go up much higher.  But, for today, let’s be patient.  Markets don’t go straight up.  I’d rather be doing trades that aren’t tied so much to the stock market.  For example, I shorted the dollar today through an ETF.  I didn’t go long any particular currency, I just shorted the dollar index, which is mostly developed countries.  This is strictly a trade.  I could give you 10 reasons the dollar should rally and 10 reasons it should fall.  I’ll let others debate that.  For now, I’m just looking for trades.  Charts I can understand.  Shorting the dollar looks like a winner to me.


1 Response to “Patience Please”

  1. 1 Hedge March 16, 2009 at 8:10 pm

    As you say, Karl, this rally might continue after a weak pullback–how the market performs during the pullback will be the real test. Will be interesting to see the news selected for focus if the market starts to fall back on its own weight here. Took some rally profits off the table, shorted some way extended stocks that had run up straight into resistance for quick trades and shorted or held some other shorts that have continued fairly strong downtrends through the market rally. NSM and EBS have been especially weak during the market rally. NSM (National Semiconductor)–their balance sheet is extremely leveraged in a time when companies and consumers are scrambling to escape leverage. How did they over-leverage? Borrowed to buy-back shares when those shares were at higher prices. EBS (Emergent BioSolutions) has fallen below its 200-day moving average and shows no signs of trying to recover yet. My short positions are hedged as this market does occasionally yield furious short-covering rallies.

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