Thursday, March 5, 2009


Today was not a surprise to me except I was surprised to see us not go lower during the last 30 minutes of trading. Many are saying there is no hope. These markets are definitely in trouble and I am beginning to believe if we have the lost decade--we might be getting out quickly. So is there any hope anywhere? I think there is.

I spent the majority of the evening pouring over charts of energy stocks and I like the sector from a technical standpoint. Many of these stocks appear to be bottoming and many were pricing in the kind of energy declines that we saw in the eighties. This time is different and it will not be as protracted downturn for oil as it was back then. Don't forget that China is still growing (albeit at a much lesser rate than we had grown accustomed to the last few years). Many are trying to deny that all of this money that the government has printed will cause inflation. We hear excuses of all sorts as to why we will not see inflation. We are so scared of deflation and that has become the focus (many are claiming that the government printing presses are only replacing the wealth lost from the balance sheets of the financial institutions). THE GREATER THREAT IS STAGFLATION. As the Chinese economy begins to heat up again, we are going to see commodities prices begin to rise steadily. The dollar is just waiting for a reason to decline and the commodities rise will could well be the catalyst that it is waiting for. We saw how truly vicious a cycle of weak dollar higher oil can get just this past summer. I think this summer could make last summer look like a walk in the park when you factor in the inflation and the unemployment rate.

Tomorrows jobs number has terrible expectations built in to it. I don't know how bad the number would have to be to "shock" the market. Back in the good ole days, if the number wasn't a bad surprise to traders---we could expect to move higher. With the mindset of traders, an non-eventful jobs report could still spell doom for the markets because we need a catalyst to buy. Gone are the days where "not bad" equals "good".

I think we could see some short covering tomorrow as traders on the short side should have plenty of profits to book after this week. I wouldn't be surprised at a move higher---nor would I be impressed. I am buying XTO right here with a tight stop. I like the chart on XTO and my fundamental beliefs about the oil/nat gas space just confirm my thoughts that XTO is a good trade here.

The banks are done. Socialism has made its way to our financial institutions. I am looking now for DOW 5750. Any bounce should just give us a good entry point for the next leg down.
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