Bounce This
9th January 2008
The Dow dipped a couple of points below its August low around 2 o’clock today when somebody rang the bell and told all of the short sellers to get out of the pool. Just like the lifeguard planned it, the market hit a floor at the August lows and bounced off like a super ball (do they still make those?). OK, nothing like it did on August 16th, 2007, but it was on higher volume than yesterday. Thats got to count for something. For the record, the S&P 500 and the Nasdaq bounced without reaching their August intraday lows. I’m just glad I took a profit on the Bear Put Diagonal Spread I was using as a hedge before heading to lunch. One key indicator that this may only be a bounce is the level of the VIX, which only reached 26 today. It climbed to 31 back in November, and 37.5 on that wildly volatile day back in August.
Keep your eyes open for an opportunity to play the downside of this market once again. And if you get a second chance, lighten up on those long stock positions remaining in your portfolios.
- JD