Tuesday, October 28, 2008

Market Explodes Up - Bad Sign

The market is doing what I expected it to do.  The market is trading in a fairly large range up and down.  The top of the range is around 9300 on the Dow and probably 8000 on the down side.  What I've been trying to do is trade the range.  I've met with some success although I haven't been able to hit the extremes very well.  I own the SSO which was up about 22% today.  That's a crazy number for one day.  As this stock  skyrocketed up, I took some off the table.  That is, I sold some even though I believed the market was still going to go up.  Why did I do this?  Don't be greedy.  In comparison to the day before, I had made a lot of money so I sold some of my position in case the market comes back the other way.

What I would like to see is the market go up early in the morning and test the Dow around the 9300 level or the S&P around the 980 level.   If this happens, I'm going to sell the rest of my SSO position, and again look to take the other side using SDS.  I don't think that this pattern can last forever but I'm willing to play it until it doesn't work anymore.

This move up is a bad thing.  I know we get excited with market rallies, but double digit moves in the market are not natural.  They are only caused by fear.  There was too much fear on the way down and there is too much fear here that people will miss the rally.  Stay out if you can, because this market will head down again.

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