Friday, September 19, 2008

Historic week=Bottom out?

This is a historic week, with Fed bailed out AIG and then the whole financial system. Dow has two of the largest falls (504 and 450 points) in the last 6 years and two of the best gains (410 and 368), all in one week!
  1. I did OK, and didn't make any serious mistakes. TSO and WNR kept most of their value for the week, and I sold most WNR today to switch to financials.
  2. I added some MS and XLF yesterday, which are great winners.
  3. Today I added more MS,WM and XLF. I was lucky, didn't add at the open and waited for the market to fade before I jumped in.
  4. In the next few weeks, unless something big happens(which is the case every day this week!), with VIX's 42 mark yesterday, I expect the general market to have a decent rally, like 5% or more. But the last two days already jumped 7%!
  5. Several things are on bull's side: stocks are oversold in the weekly chart and made a V shape bottom; short selling ban in financials;government bail out eases the credit stress.
  6. I chose MS, since they were in the 40s just last week, and now at 27, and they had a great quarter, the 52 week high is 69. Since BSC and LEH are gone and MER is bought, I expect MS to benefit from this and gain more market shares, by comparison, GS is at 130, high was 250.
  7. WM is another story. It's up for sales, and even with last two days sharp rally, it's 88% off the high. If BAC could pay MER 70% premium in the dark market 5 days ago, I expect WM can get some premium (even though it's a fire sale, to be sure) from C or JPM or someone else.
  8. These strong companies, like BAC, in a few years, will make huge profit because of the assets they got at fire sale price now.
  9. Long term, I expect the US government's move will weaken the dollar, and strengthen commodities in general, so keep and eye on gold, oil, natural gas, Ag, etc and add on weakness.

What's next:

  1. Because we had an extreme week in market action and market rallied in the last one and half days, I think we have a short term bottom, to say the least. We'll have a decent rally when all are said and done.
  2. The facts that CNN and CNBC, local news are broadcasting news like "Are your money safe?", including Barrons, that tells me, it's precisely the market bottom, when public are panic. Let's see if this indicator holds true this time.

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