744 points lower in just ten days?

Was this the correction we needed? All it took was some populist comments from President Obama, Ala Huey Newton in the 1930’s and we get a mini Russian Revolution?
Time will tell if this was the correction on the way to 11,500 or the beginning of the slide down to 1/2 way back of the last 11 month rally. The low in March 09 was 6440, The recent high was 10,767. 1/2 way back of that move is 8603. If you’ve read my blog for any length of time, you know I like the 1/2 way back trade.
So, if the wheels fall off the US economy, we could have a way to go yet.

Friday’s trade (tomorrow) should be interesting. Perhaps we got close enough to the 10,000 mark with today’s low in the Dow cash at 10,023. The 100 point bounce from there was OK, but I would have rather seen a definitive bounce higher to the 10,400 level. That would signal a repudiation of the down move, and set the tone for some traction up to at least the 11,000 level.

I had a vision of Time magazine with a cartoon of Obama riding a bronco or a bull for the “5000 point rebound”. That would necessitate us getting a print at 11,440. A month ago I was sure we’d get that magazine cover.
However, if anything I’ve learned over the past 20 years, its that lots of time I am a little late on getting really bulled up, and usually that is a top.
That’s why I do not hesitate to flip and fade myself. If I hadn’t been able to do that comfortably, I wouldn’t have lasted very long.

Rule Number One, Always be willing to take the temporary embarrassment of being wrong, rather that the longer term embarrassment of being to stubborn.

Tomorrow is the last trading day of the Month, as well as being one week removed from the next un-enjoyment figure. Depending on how the labor department reports it, if its revised or adjusted or what have you, this could be another less than stellar number. Too many months of “only 80,000 jobs loss add up to the same damn thing.. The fact that its 80K a month instead of 300K, just means that everyone that could be fired has been fired. At some point, we’ll reach exhaustion.
Also, if we could ever get a grip on the new socialized medicine program, it would give employers a chance to pass the price of the new program on to the US consumer. So, Obama will force companies to “pay” for health care.. Those companies will force the American consumer to “pay” by having more expensive goods.

I spoke with a gentleman today here in Chicago. He was a business owner with 20 employees. His bill for meeting the government mandate for health care, according to the plan which is going up before congress now, is 240K a year more. Who do you think is going to pay for that? And isn’t that going to make an employer think twice about hiring a new employee? Does anyone else see that this is the problem that liberal democrats ignore when they make these sweeping plans. Sooner or later, the American middle class pays for it, in this case it will be with higher prices and higher unemployment. So there is no such thing as “free” anything.

I learned in High school Econ that things like that result in higher inflation. Things may have changed a lot in 25 years, but that equation, I am pretty sure, has stayed in the unchanged category, along with Newton’s idea about that pesky thing we call gravity.

Overall, I don’t know what to guess about this next unemployment number. I do think if we get a negative number and the Dow holds up, that would signal underlying strength in the market. Whenever a market gets bad news and rallies, its a sign that the fundamentals either 1) are not applicable, or 2) have ignored a change which will only become apparent after a longer period of time.
If the Dow truly serves as a forward looking indicator, such a rally in the face of bad news may just be what’s needed to keep the momentum up from the March O9 lows.

If it doesn’t hold this 10,000 level, we could get that 1/2 way back flush to 8600. Have your stops set up to get you moving with the Market, no matter what it does.

Good Trading

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