This is spooky.
Yesterday, in my 9:53 am Alert to Members I said: “I will be looking for this to reverse tomorrow unless they come up with something to back up this rally but today we can get back, like Europe, to Wednesday’s lows – which is Dow 9,800, S&P 1,060, Nas 2,130, NYSE 6,970 and RUT 615 – that’s where we’ll be looking for possible shorts.” So where did we finish for the day? Dow 9,789, S&P 1,063, Nas 2,131, NYSE 6,940 and RUT 613 – I was off a grand total of 47 points on 20,536 points worth of indexes – that’s 0.2% off, not bad for an opening forecast!
So the question for today is: Did they come up with something to back up this rally? Well we have the FDIC proposing banks pre-pay them 3 years of assessments ($36Bn) to keep them from having a negative balance sheet. No, that’s not it – in fact, that makes me kind of nervous as they sound desperate. The SEC is holding hearings to restrict short selling. Nope, we tried that last year and that was also desperate. Japan’s CPI fell 2.4% in August. No, I’m pretty sure that’s a bad thing. No, nothing concrete has been done to justify yesterday’s excitement so I’m going to listen to the guy who was off by 0.2% yesterday and plan for a reversal a volume picks up.
We did go into the close yesterday naked on our long DIA puts and we bought back our short Sept DIA puts that we sold to cover for a very nice 75% profit and we held our Oct $98 puts so we did follow the morning plan of shorting into the rally. Now we have to see whether Retail Sales (8:15), Case Shiller (9:00), the CEO Survey (9:35), Fed Gov Fisher (10:00), Consumer Confidence (10:00) and the Investor Confidence Survey (10:00) will be enough to get us over those levels (at which point we kill our shorts) or don’t do enough to keep us aloft.
Today is, of course, the 1-year anniversary of the Dow’s 777-point drop. I was just reviewing our Weekend Wrap-Up from the day before the crash as well as our Crash Day post, which I called “Too Little, Too Late” as I was very skeptical that the bailout package would solve anything anyway. It isn’t really as exciting a read as you may think because we were prepared for the fall and had bet accordingly but we were still…
