Monday, September 29, 2008

State of the Market - 9/29/08

No need to summarize today's action as I am sure you are aware of what happened if you were a trader or anywhere near a screen (tv or computer) today. I said last night that there were reasons to be bullish and bearish right now, and that above all the uncertainty still out there made it difficult to do much of anything. That proved to be the case today. I admit that I expected at least a little bit of a rally today, but I also expected the bailout bill to pass. Today was a perfect example of why news-driven markets are difficult to trade and the best game plan when faced with one is simply to have the patience and discipline to stay out of the game. I am glad I am in cash right now. My stress level is high as I think about what is happening to our county, but I can't even imagine how high it would be if I was involved in this market.

Just some random thoughts:

1) I was surprised the VIX wasn't higher than it was today - mid 40's is definitely high, but for the magnitude of selling today, I expected a little more. This is not good for the bulls and could lead to more downside from here.

2) I also thought gold would be up a bit more than it was. I put off any plans to buy today when I saw futures down this morning, but I did watch gold early on. When it didn't move much, I just shut my screen off and figured it was best to pass. Oh well. Perhaps the bailout getting voted down played into this.

3) I guess we can forget about the IBD follow-through day. The lack of great charts was a clue here. When we get a really good follow-through day, one that might really be the bottom, a lot of charts will be showing up of stocks with good fundamentals and good bases.

4) I wouldn't be surprised to see the biggest overthrow in Congress in terms of incumbents being ousted by voters this November. Speaking for myself, I plan on voting against the incumbent in all races. I continue to wish there was a third-party candidate to vote for for president. Whether you agree with this bailout or not, it is disgraceful how in a time of crisis all our politicians can do is bicker back and forth and try to put blame on each other. Perhaps that is a big reason we are in the state that we are in as a country.

5) There continues to be nothing to do here than sit back and watch history unfold. Even if we could short right now without worries of repercussions, I think I would feel somewhat weird doing so. It is not so fun to be short when you watch the meltdown of an entire economic system, at least in my opinion. Some things (well, many things) are more important than money.

I really don't have much else to say. What is there to say? I could talk about trying to catch a bottom and the fear and sentiment readings and all of that, but I am not interested in being a hero here. Anyone who sticks their neck out here trying to catch a bottom could very easily get it cut off. Maybe they deserve to. Sit, wait, and watch history unfold. That's the best strategy for the near future. If we bottom anytime soon, there will be plenty of time to catch a move up. And let's pray that somehow things will get better, and the armageddon-type scenario in our financial sector described by many will be somehow avoided. Good luck.

6 comments:

hayfro said...

Very nice recap. You basically said everything I was thinking. Analysis at this point is useless with all the fear out there. About the only thing I could add is I expected the $Cboe options equity put/call to be higher.

Mac said...

Thanks. I did see in IBD tonight that the put/call ratio was only at 1.20, which doesn't show that much fear. The fact that volume was not nearly as high as it was last week and I think the bulls have reason to fear more downside here, as hard as that is to believe.

Gio said...

Yeah, the Vix should have printed 50 since everyone thought the bill would pass today. Still, a 30% jump is worth covering shorts or selling puts on.

IBD really needs to quit with the FTDs when volume on them are unconvincing.

Politicians are idiots! we should have all the economics teachers in universities across the nation (and in Germany and Japan) vote on what to do with the bailout. wouldn't that be fun?

-gio-

Gio said...

whats your threshold for a "high" p/C ratio? normally I'm satisfied with +1.

Anonymous said...

Hi I am glad that you keep the faith and stay cash, despite reading people in forum and chat room saying how much money they are making during your absent.

Mac said...

Gio - I remember sometime two weeks ago the put/call was up around 1.7 and maybe even higher. I have seen it print 1.4 throughout the day a few days in September. I was just surprised that it wasn't higher on such a historic day. If we gapped lower and then reversed today, I may think we could put in a capitulation bottom today, but it looks like we will open higher which may mean we're not done going down.