Going into the holidays the financial market bounce appears to be losing steam. Once again, mometum is diverging with price, but this time it is giving a bearish indication. The market will probably spend at least the rest of the year drifting along in a trading range. Might as well take this oportunity to enjoy time with family and friends to recharge your batteries before coming back to see what the new year brings. Let’s hope its an improvement over this year.

JD

Trust:  Get everyone to trust you.  It takes time but with patience it can be done.

Secrecy:  Don’t tell anyone the secret formula.  Keep ‘um guessing.

Exclusivity:  Troll the ultra-wealth circles and make it hard to join.  High-net worths love hard to attain perks, see black-card.

How can so many people be duped?

Take the entire Madoff affair and replace it with 4 letters: T A R P.

Scam the people and keep selling positive returns.  Hilariously funny that Barron’s is out with its 2009 prediction of an 18% return.  If they had said an 18% decline would it cause a stampede out of stocks?  The deleveraging process is in full swing.  If you are going to invest, only use cash-secured puts.  That way, when stocks fall (they will), you will get in 10%-20% lower.

BA

The financial markets tanked all over the world when the Senate voted against the Big 3 Auto Bailout, but when the Treasury said it stood ready to provide funds for automakers until lawmakers could consider a longer-term package next year the market steadily rose thoughout the day to finish the day up slightly. For the week, the SP 500 and the DJIA were virtually unchanged, while the technology stocks in the Nasdaq posted a 2% gain.

Volume has been weaker during the rally over the last couple of weeks, so while it appears that sellers may be done with most of their selling, the recession appear to be holding back the buyers. It could not be that most investors still waiting for the next bomb to drop on Wall Street or in Washington. All of this helped the VIX fall by almost 10%, which may have been the most significant thing to happen in the markets this week.

The market appears to be in a trading range that has a slightly bullish tilt. Selling January puts will not provide near the profits that selling December puts did, but that strategy should still yield good returns. A safer way to profit in this market may be  Bull Put Spreads. Selling the SPX 850 and buying the SPX 840 will let you keep the credit as long as the market stays above 850 by the January expiration.

JD

Looks like we got our higher high on the SP 500 and DJIA yesterday, and managed to sneak a little higher on the MNX today, but that did not hold for any of them by the end of the day today.  That move could provide the break in the down trend that everyone is looking for. A continued pull back to just north of last week’s lows should provide a better opportunity to get back into the market. If that holds, we’ll probably consolidate for a while, which certainly is better than the alternative.

JD

Monday’s -9% drop in the SP 500 and -8% drop in the DJIA may have provided the best opportunity to start moving back into the financial markets, but I do not think it will be the last. From a technical perspective, Monday may have provided us with a higher low, but until we see a higher high, I would still approach this market with caution. We need to reach 900 on the SPX, 9000 on the DJIA, and 120 on the MNX for that to happen. When that happens, the following pullback should provide a safer buy point. If it does not happen, we may not be out of the woods yet.

JD