So we had a good rally, and two 90% up days along the way. An excellent week for Bulls. There are two schools of thoughts. One, it may feel like,oops..I missed the rally. Probably “that” was the bottom and since I don’t want to miss the “value”, I better get on-board quickly. While other thought is, Nah, this is one of those bear market rallies, it was due to short covering and it is bound to fall back.
Which side are you? What to do? For me personally, I took advantage of rally and closed most of the bullish positions on our OPNewsletter. In hindsight we may say, gosh, that was a bad decision? Or we may walk to the bank smiling on our decision. We’ll see.
Generally, I mean generally, bull markets starts in the midst of deep pessimism. When retail public has already suffered big losses, lost interest in markets and is left with no money, the bulls find no resistance, no sellers and it marches to its own beats.
Last week’s rally possessed one thing different from rest of the rallies so far, it was driven by demand. Albeit, I am not sure whether demand was short covering or bottom fishing; I am not sure (Though I did pick a few value plays). So let Mr. Market guide me by his actions, by the committed money of its participants and whether it can cross 7,500 supported by continuous increase in demand and supported by strong volumes.
This week is filled with lot of data. Industrial production today at 9:15am, Housing starts and Producer’s Price Index (PPI) tomorrow at 8:30am, Consumer Price Index (CPI) at 8:30am tomorrow followed by FOMC announcement at 2:15am ET (is there anything left for Fed to announce?). Then we have jobless claims on Thursday 8:30am, Cash settled index option expiration on Thursday as well, followed by Uncle Ben speaking on Friday and the March US equity options expiration day, on Friday. Possibly Goldman Sachs (GS) will be announcing earning this week and Fedex will also share a glimpse of economy’s move.
Net, any day can reverse Mr. Market’s mood in either direction. So trade very carefully.
This week has some interesting plays to offer that I shall keep sharing time to time, so stay tuned.
Profitable trading, OP