Tuesday, 22 January 2008

Down we go again...

The last week was quite something. Although the statistical data reported during the last week were not that bad (of course, they would not - we have wizard economists and econometricians working for the U.S. government!) and although there were some good spots in reported earnings (like IBM and GE), the markets rushed down in a big-time selloff. A piece of poop news here, a panic-inducing publication there, a cry from some smart-ass guru analyst elsewhere, and here is the outcome - we are going down. Well, this is the rule of the market game, and Bears are enjoying their relatively short-lived momentum of power and truimph. Strong corrective moves, like the one we had last week and will "enjoy" at least for a couple of days this week, are necessary for these greed-driven, overinflated markets (I personally certainly got a couple of good lessons for my greed and ego :-)).

A short-term positive thing is that we are quickly approaching some important support lines and are moving pretty quickly into a deeply oversold territory, so a breakout and a relatively short-lived rally are about to take place. This week looks like a good candidate for this to happen since we do not have any significant stats reported or any planned "public performances" from the top government and Fed officials. Some are even talking about an "emergency" rate cut before the scheduled January 30 Fed meeting, when everybody expects a 50 bps cut. Here in Canada, on January 22, we are very likely to see a 25 bps cut from the Bank of Canada, which will probably help the TSX index recover somewhat from heavy Monday losses or at least slow down in its free fall.

My long-term positions are in minuses these days, but am not very concerned about it. Of course, I probably should have stayed in cash or at least should have sold the positions for some short-term gains earlier, but I view it differently. If you do not actually buy and trade stocks, you will never learn how to do it. So I can say that I am just getting my practical technical experience right now, with small stock positions, at a small price.

I sold my DHI short-term position last Monday for a small 7.3% gross USD profit. Should have sold WFC on Wednesday as well, but decided to hold it a bit longer. Wells Fargo's reported earnings were in line with analysts' expectations and this bank is one of the better U.S. banks (although, to be honest, it carries its share of poop too), so I decided to stick around this stock for a while. If we go too deep down and I can't sell it at my minimum short-term target, then I will just keep it because it will be one of the first financials to break out and lead the rally once the Bear market for banking stocks is over.

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