Last week I paid very close attention to the markets and the news. On news of government intervention of any sort, the markets plunged or the markets rallied (at exceedingly opportune times). Several times I took profits on my two primary trading vehicles (SRS, which is double-short U.S. real estate, and FXP, which is double-short China) when my stops were triggered and I reentered positions at lower prices. My trading account was still 100% short at market close on Friday. Needless to say, I feel pretty darn good about my trading account, but I’m still staring at losses with my long-term account. I haven’t yet gotten around to reevaluating my long-term holdings, whether or not to add to them or to switch into stocks that are even more undervalued.
As for today, on a technical level, it seems S&P broke through resistance. Chances are increasing that the DJIA will retest Novemeber lows and then fall below 7k and the S&P will fall below 700. I feel that investors and traders are now more psychologically conditioned and prepared to take the market lower simply because they have become accustomed to seeing the DJIA in the 7000s and the S&P in the 700s. Traders and technical analysts (see Slope of Hope and Maoxian) see the S&P at 650-660 as the next large resistance level.
I remember hearing the word “capitulation” a LOT during October and November. “Capitulation” nearly replaced “change”, which had the number one spot on my list of “Words I Never Want to Hear Again.” I suspect “capitulation” might soon reenter the vocabulary of the buffoons on CNBC, unless they’re not too busy talking about bailouts, nationalizations, and car czars.
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