Sep 25 2008
Trading strategy the next few weeks
The market is too volatile and it is impossible to trade. I just can’t trade this. Attempting to trade this market would be worse than gambling. The best course of action is to sit on my hands in 100% cash and do nothing until the risk/reward ratio becomes very favorable. Sure, the economic situation is dire and the market is staring into an abyss. However, there will always be some sort of bullcrap intervention. I would be looking for a short entry around 1240 on the S&P 500, 735 on the Russell 2000, and 1775 on the Nasdaq 100. There has to be one more bounce out of this sucker.
Concerning the bailout, I am adamantly opposed to it. However, from a trading perspective, I would gladly short the market once the bailout is passed because I know that it will not work. But seriously, it is no good to favor a bailout just for a trading opportunity. I’d much rather not see the bailout pass and have the market tank while I am not short, rather than to have this bailout pass and have the whole nation screwed for it. For the sake of this country, I have been e-mailing my congressman and my two senators every night the last few nights telling them to oppose the bailout. I called my congressman’s office today and made it clear to his staff that if he votes for this bailout, there will be severe consequences in November. Thousands of other people have been doing so too. I urge you to do the same. Do not give up on this bailout. You have a voice. Your representatives will listen if you nag them enough. If you threaten that you will do everything in your power to make sure they are not re-elected if they vote for it, they will listen.
Give them hell. They love it when you do that.
For more info:
Fed Up USA
Mish’s Global Economic Trend Analysis
What I find very surprising is that it seems that the House Democrats and Senate Democrats are the ones trying to get this thing passed. Sure, they want to modify the plan so that it contains provisions for strong oversight, but the plan is still a waste of taxpayer money at the core. This is no time for some kind of crap bipartisan plan. The legislation is pure trash. Why the heck are the Democrats trying to rubber stamp this horrible Bush/Paulson proposal? It’s ridiculous. It is the House Republicans who are stalling this plan. For once, I actually appreciate what these House Republicans are doing.
UPDATE: Nevermind. I remain thoroughly disgusted with House Republicans. Here’s what they are proposing…
via Bloomberg
Republican lawmakers offered a plan calling for Wall Street firms to purchase insurance on mortgage-backed securities and advocating tax cuts and relaxed regulations.
I have a few comments on this…
1. Insurance? Insurance is an accounting fiction. We already know what happened with credit default swaps. And who is going to do the underwriting? The government? Isn’t this the same as a bailout?
2. Tax cuts? There’s talk that it means a two year suspension of the capital gains tax. What? How is that supposed to help? If I hold stock, then heck yeah I am selling now. Also, if I hold stock at a loss, I am not paying capital gains tax anyway.
3. Relaxed regulations? You’ve got to be kidding me.