Skip to main content

From worried bear to cautious bull?

Credit markets are showing glimmers of improvement. Note the following quotes from MarketWatch.com:
The cost of short-term dollar loans dropped more than expected Monday, a signal that money markets are slowly returning to normal after threatening to derail the global financial system earlier this month, economists said.

The London interbank offered rate, or Libor, for three-month dollar loans fell to 4.05875%, down sharply from 4.41875% on Friday. The one-month rate fell to 3.75125% from 4.18125% on Friday.

Later Monday, U.S. Federal Reserve Chairman Ben Bernanke, in testimony prepared for delivery at a hearing before the House Budget Committee, said he was encouraged by signs a severe credit blockage was easing after massive efforts by governments around the world to recapitalize major banks and guarantee short-term bank debts.

On Friday, three-month Libor posted its first weekly decline since July. The rate had pushed as high as 4.81875% on Oct. 10.
In yesterday's Weekly Review post, I described how the Alert HQ stock market statistics showed an improvement after last week's rise in stock prices. The important indicator showing how many stocks have their 20-day moving average above their 50-day moving average held steady and looks like it could be forming a low.

I know that one data point does not make a trend; however, combining the technical situation with the credit market data as described above has me thinking that it is time to start moving to a slightly more bullish stance.

As a result, I sold the remainder of the ProShares Ultra Short QQQ ETF (QID) and the Ultra Short Midcap 400 ETF (MZZ).

To complete my turnaround from worried bear to cautious bull, I opened a modest position in the ProShares Ultra S&P 500 ETF (SSO).

These actions were carried out mid-morning so I managed to avoid some of the losses eventually realized by QID and MZZ by the end of the day as well as pick up some profit from the run-up in SSO.

Am I convinced we are in for a booming bull market and that the worst is behind us? I am not so bold as to assume that to be the case. I merely feel that the market seems to want to move upward now and, since I have a small trading account, it behooves me to listen to Mr. Market and act accordingly.

In a triumph of possibly misplaced reason over trading instinct, I held on to the ProShares Ultra Short Consumer Services ETF (SCC) and was punished for the effort. All recent evidence (bad retail reports and rising unemployment, for example) points to the fact that consumer spending has been falling and that we can expect it to continue falling, resulting in a very week holiday shopping season. This should tend to drive this double short ETF up. Today, though, investors were having none of this idea. In a rising market, all news is good. We'll have to see how earnings season impacts this ETF.


Disclosure: long SCC and SSO

Comments

Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Thursday Bounce: Trend Busters, Swing Signals and Trend Leaders for July 9, 2009

This is a quick post to announce that we have published Thursday's Trend Leaders, Swing Signals and Trend Busters at Alert HQ . All are based on daily data. Today we have the following: 72 Swing Signals -- A couple of days ago we had 35 signals, today we have twice as many. Happily, we now have 65 BUY signals, a mere 4 SELL Signals plus 3 Strong BUYs. Whoo-hoo! 56 Trend Leaders , all in strong up-trends according to Aroon, MACD and DMI. There are 18 new stocks that made today's list and 60 that fell off Tuesday's list. 48 Trend Busters of which 5 are BUY signals and 43 are SELL signals The view from Alert HQ -- Talk about mixed signals. If you look at our Swing Signals list you would think the market was in the middle of a big bounce. BUY signals are swamping the SELL signals and we even have a few Strong BUYs. Yes, there's a good sprinkling of tech stocks and tech ETFs but the distribution is pretty broad-based with a good number of different sectors represented, eve

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position. This first post in the series starts at the beginning: getting good investment ideas. Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets. As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professional