November 20, 2008

Market Review and Commentary for November 20, 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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We dropped another 445 points on the DOW. I added one additional point to yesterday’s list.

Nothing has changed from my analysis of yesterday and the past several weeks. Review yesterday’s video again… I’m ready to buy on any dip in the DOW below 7000 as I believe a huge rally will be coming. If we rally before dipping below 7000, I will stand aside until it appears we have a sustainable rally – but not for long (a day at most).

Remember: We are dealing in probabilities only- no one can tell the future. Anything can happen including a drop in the market to 5000 or lower or we can rally to 10,000 in a few days. No one really knows. Worst case: The markets close for a month like they did in Russia.

There were 5 important things I mentioned in this week’s analysis that indicated a drop in the market this week (some things I have been talking about now for several weeks):

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. Yesterday it did by dropping 427 points. Today it dropped another 445 points.

2) The VIX retreated Wednesday but *stayed* above the rising trendline – which is bearish for the market.

Today the VIX closed at 80.86 up almost 9% on the day. That’s almost 20% in 2 days. It’s the highest close on the VIX since records have been kept on the index.

3) The head and shoulders pattern 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 yesterday – which is bearish.

4) The 7882 level on the DOW is the new resistance level if we get a rally. That was the low of October 10th.

5) We are under the 200 period MONTHLY moving average on the DOW going back over 107 years.

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

What to buy? (In reality you could probably buy anything that’s still trading) 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 (The current price dividend yield on URE is 26%! even without the price appreciation)

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

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.

What if the market does the un-expected and rallies hard instead of dipping below 7000?:

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

WATCH YESTERDAY’S VIDEO FOR MORE INFO

Trade With Confidence