Wednesday, May 13, 2009

At the Turn ...

I would like to say I called the top of this particular rally.  With the Dow down over 180 points and consecutive days of weakness, it sure does look like we have come to the end of this particular little rally.  However much I would like to say that I called the end of the rally I could not say that with any credibility.   This rally has lasted way longer than I would have ever guessed.  Oddly, over a month ago I said that we would probably reach 900 before the rally reversed.  I'm looking like a fortune teller right about now as that is exacly what the market did.  The S&P traded up to 900, got slightly past it, and is now coming back down.

But however great that call was, I can't say I knew what I was talking about.  I thought we would get there much quicker than we did.  That call was over a month ago and I honestly thought we would get to 900 in a matter of a week.  Not a bad guess considering how much the markets were moving at the time but no way did I think a rally would last nine weeks.

So where now?  Let us see how accurate I can be.  I think we go lower here, significantly so in fact.  I doubt we will get all the way down to the mid 6oo's like we saw before but I do think we get close to the low 700's over the next several months.  I have a pretty sizable short position, so I'm well position to weather this downturn but if the market is slightly down tomorrow and hasn't run too far, I will probably short some more.  Of course, I have been hedging most of my trades and I will do it here too.  I will go net short for sure, but I will probably take a position that is long on interest rates (short on bonds).  I'll explain that trade tomorrow if I indeed do it.

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