The bounce

Today's reversal (Dow down 320 at one point and then closed up 300!) in the market pretty much confirms this is the short term bottom for the next few weeks, judge the length of this down leg and the magnitude, I guess the bounce in SPY will be back to around 140 (today's low is 126 and closed at 133.9) in about 1 to 2 weeks.

The market was very oversold even before today, now the capitulation in market early today is very bullish short term.

After that, all is possible.

Actions and reason:

1. Added GDX again to play the Fed cuts and inflation, gold will likely to resume the up trend, this correction in gold is shallow due to Fed's action. Gold is likely to hit $1000 before going back to $800.
2. Added DBA again, this is to play the inflation, which is almost certain in this environment. DBA maybe the best in this environment, due to three out of its four components are in shortage in 2008: corn, wheat and soybean. Only a deep recession in US will cause it to crash.
3. Added QLD. This is new. At 66.5 (low is 64.53, I waited until it started to rally). It closed at 73. I will keep it tight and let it go when SPY is anywhere close to 140. Today QLD is better than SSO since Apple added to QLD's downside, which was down over 10% at one point. This is a small position.
4. Keep enough cash to add DBA and GDX.
5. So far ,my pick of DBC is not too bad; but NLR is very bad, down almost 20% before today's small bounce since I bought it. Glad it's only the no. 4 position after GDX(no.1), DBA(no.2) and DBC (a distant no.3).

Next:

If the bounce indeed happens, then once it's back to 140 (about half point between high of 157 and low of 126 in SPY), we may go beyond that ( the August model, went all the way back to all time high, which I think is unlikely), or the bears return (which is very likely). And I need to reduce holdings to raise cash when I think the bounce is close to be finished. Rather to be safe than sorry.

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