His call for this week:
We were bullish between the October 10, 2008 “capitulation “low” and the eventual “price low” of November 20th, believing the equity markets were in a bottoming sequence. We stayed constructive into the envisioned mid-January timeframe when we turned cautious. Last week, for the first time since turning cautious, we recommended “long” trading positions on Tuesday’s open for the aforementioned reasons. Our sense was that the equity markets would shake off the worse than expected economic numbers and rally with the “carrot in front of the horse” being the stimulus package and the bank rescue plan. Interestingly, last Tuesday’s action reinforced those views since it was only the third time since 1990 that the SPX rallied more than 1%, while the financials fell more than 1%, which we thought was indicative of a stock market that wanted to trade higher. This week the battle between “light” and “dark” resumes; and this morning “dark” has the edge since the economic stimulus package has not been passed. We think, however, that like last week “light” will triumph and the equity markets will re-rally. That said, this is no lead pipe cinch, so keep your stop-loss orders, and downside hedges, in place. We’ll talk to you next week.
Consider as a probability!
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