DJIM #12, 2009
Monday, March 23, 2009 at 05:40AM Heading into the last trading week of the month, we can't help but feel emotional when looking back at the events that have transpired up to this point. The biggest question on people's mind these days is "have we seen the worst?" Nobody knows! What we do know at this point, is that there is a sense of stability returning back into the financial system. Of course, none of us really have the first hand knowledge on how things are or going to be with the financial system in U.S. Judging by the action from the government, the announcement from various banking CEOs, and most importantly, the stock action itself, you can't but feel that we may have seen the "worst" in these financial companies.
Just a couple of days ago, Fed announced some drastic measure to pump another 1.2 trillion into the system. This weekend, there's news that Geithner will announce details of the long awaited "toxic asset plan" as early as Monday in more attempts in putting a stop to this crisis. We have often said in the past, it will take time to fix a broken system. As long as the system (financial) does not break down due to total lack of confidence, then everything else is recoverable. At this point, we have to believe that the government is doing everything it can to restore confidence, unfortunately, bonus bill is getting a lot of negative headlines after the Treasury buying news. We may all not agree on a lot of details of its plan(s) and even go as far as question the efficiency of the plan(s) going forward. However, we have to agree that they are at least on the right path and it's all we got. For now, we simply don't want to bet AGAINST the government.
Over the past week, shorts have been literally vaporized by this market. Market itself has pulled back on profit taking to the SPX 770 area. We view the action Friday as a healthy 'tired action' pullback, primarily because we're not seeing shorts reload, we've been highlighting in bold here recently... "shorts are not lining up new positions due to upside risk to news". The toxic asset leaks this weekend is one big risk for the shorts. As traders, we are looking for the strongest sector on this pullback and we really like what we saw from the Commodities, even on the pullback Friday During the next little while, our trading thesis will be focused primarily on the commodity sector, maybe the financials will again be in focus if the Geithner is liked by the market. We have explained in the past couple of Journals on why we like the commodity (buzzword, inflation) sectors going forward. Oil and oil related are a main concentration, but we are allowing everything from coal to steel to get back onto our trading list.
There will be some economic data in the coming week. We'd also have a good glimpse where the short term support is for this market. For now, we are definitely looking to trade up on pullbacks within the commodity sector.
