November 19, 2008

Market Review and Commentary for November 19, 2008

DISCLAIMER: These are trades I am doing and may not be right for
you. Use your own Due Diligence when making financial decisions of
your own choosing. This is NOT a recommendation of any security.
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There were 4 important things I mentioned in yesterday’s analysis that indicated a drop in the market today:

1) The market, when it touches or ‘tests’ a price area 4 or more times it is extremely likely to finally push through that area.

Well, I counted 8 times the DOW has traded down to 8000 but didn’t breakthrough. Today it did by dropping 427 points.

2) The VIX retreated yesterday but *stayed* above the rising trendline – which is bearish for the market as it indicated a higher VIX.

Today the VIX closed at 72.46 up almost 10% on the day.

3) The head and shoulders pattern developing on the DOW is highly unusal to say the least in a bear market and does not conform to any techncal analysis ‘rules’.

If the analysis is correct (and I emphasize “if”) then we broke the neckline today – which is bearish and will eventually pull the market to the 6800 level.

4) The 8425 area on the DOW was critical. We dipped above it slightly today but the market could not hold it. That was a bearish intra-day signal.

ANALYSIS:
If the market drops below 7000 tomorrow or Friday or Monday:

What to buy? I don’t know about you but here’s what I’m buying:

UYG – price range I’d be a BIG buyer = 2.81-2.95
URE – price range I’d be a BIG buyer = 2.50-3.00

I also like these individual stocks (in no particular order): AA, TTM, SBUX, DD

Will it hit those prices? If we’re lucky! … but no matter what price they are at IF the DOW dips under 7000 I’m BUYING as much as I can afford.

The above scenario is for aggressive, crazy daredevils who love to jump out of planes, bungee jump and being “opportunity junkies” want to make millions like they did in the 1929 crash by trying to catch the bottom of the market and waiting for the market to ‘come back’ in a few years (months?, days?).

WARNING: Buy only what you can afford to lose… do NOT get in over your head. There may be opportunities down the road with less risk… but I’ll remind you that opportunity comes at a time when NO ONE recognizes it as an ‘opportunity’. If they did, the opportunity would be gone.

What if the market does the un-expected and rallies hard tomorrow?:

Wait and see if the rally finally holds. If it does there will be plenty of opportunity to buy once the rally proves itself.

More in today’s video:

WATCH TODAY’S VIDEO

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