10k, 9900, 9800, 9700, 9600...falling like flies !

(click on chart to enlarge)

Meltdown Monday? Well, it's kinda looking like it could be. The Dow hit our minimum target set last Spring of 9750 this morning (which was -570 or so), tried to bounce, but slid again to 9500 (which was -800). It's unlikely that even 9500 will be a serious low, even if it launches a several day run back up toward 11,000. A move above 12,000 would be need to technically turn this market around for a multi month move. More likely, several more up-down sequences lower should at least test 8700-9300 before Halloween, perhaps the mid 7000's. When they got to 9500 at the worst today, a panic buy program was launched on light volume that put 500 points back on the Dow, but they still couldn't keep it above the magical 10k. Remember, on Sept. 25th, we wrote, "THE MARKETS ARE AT THE HIGHEST RISK OF A CATASTROPHIC SELLING EVENT SINCE 1987. If our lawmakers play politics too long (and I means in hours, not days), we are going to see the "BIG ONE"! Any break of Dow 10,500 should launch a landslide of selling to at least the 9,500 area, more likely 7,500-8,000 (another short term bottom should be created there). Only an immediate move above 11,500 will postpone the coming slide (perhaps allowing 12k to 12,300 in a panic to buy like last week), which could easily slash another 2,000-4,000 off the Dow this year." Today's low was 9525, 1500 Dow points under the close on Sept. 25th at 11,000. Some might call that catastrophic, but it wasn't, YET!

By the way, all this selling is happening without the ability to "sell short", which doesn't come back online until Thursday, unless they postpone it again. So, the media's story that short sellers "caused" this slide is proving to be faulty.

The carnage is wide and deep, and I feel you pain, for I've been trapped in situations like these in the past. This is a bit different than past bear markets, as this one sat on top of the largest credit extension in history. Regression toward the mean suggests that this correction becomes as overdone to the downside as the bull market became to the upside. If this is becomes reality, my halucination of Dow 5k and S&P and Nasdaq 500 levels. Question: Are we closer to the top or the bottom? Well, let's say we're in the middle. From 14,200 to 9800 is 4400 points. If we're half way, then we subtract 4400 from 9800 and we come up with 5400. Hey, that is a number I can justify with multiple targeting methods, and have for over a year if you've been keeping track. What if we're closer to the bottom? Okay, let's say we're 2/3's done. Now we can target 7600 Dow for the ultimate low. But, what if we're closer to the top and are only 1/3 done? Then, we have to target that scary post 1987 crash low of 1700 Dow. Okay, even I don't want to consider that, although objectivity demands that I must keep it in my head.

The "markets" now want a Fed rate cut, and they may childishly pound on the floor (prices) until they get their way. I will use the 7500 area to become 1/3 invested; the 5400 area to become 2/3 invested; and, save the final 1/3 for either the 1800 area or the break back above 11,000. The hardest decisions in the world will be to invest money at these levels, but I have found when I have a plan, write the plan down, and review the plan when I feel anxious, my odds of execution of the plan increase dramatically.


(closed trades are always in black type)
INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL: Currently, there are no open short positions, which usually happens close to market lows. But, stay tuned. We took amazing profits into the Freddie/Fannie failure and will re-short on a reasonable rally.

INTERESTING PLAYS TO ACCUMULATE OR BUY: GE under 20 (entered 19.99 on 10/9) and adding under12, BX under 10 (lower from 11 on 10/9)(entered 9.99 on 10/9) adding under 5, GS under 75 (down from 85)(entered 74.99 on 10/10) adding under 50, MSFT under 21 (up from 18 limit)(entered 20.99 on 1010), YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG under 390 (entered 389.50 on 9/28, using break even stop as of 10/2, exited at breakeven on 9/29) and under under 310 adding under 230, EBAY under 19 (entered 18.50 on 10/6) and adding under 12, DELL under 17 (entered 16.50 9/16) and adding under 10, SMH (entered @ 25 on 9/15 at market open) adding under 21, SLV under 10 adding under 7, SBUX under 13 (entered 12.99 on 10/6), RIMM under 95 (entered 94.99 9/16, exited 99.99 on 9/25, +5.00 or 5.5%) but will re-enter under 63 (re-entered 61.18 on 9/29, stop set at breakeven 10/2, exited breakeven on 10/6) re-entering under 53 (entered 52.99 later on 10/6) and add under 41, AAPL under 135 (entered 134.99 9/16) adding under 90 (entered 2nd time 89.99 on 10/6) and under 65 , INTC under 19 (entered 18.99 9/16) adding under 14. CRM under 45 (entered 44.99 on 9/29) adding under 32. SBUX under 13 (entered 12.99 on 10/6) and adding under 8. And, new additions in the natural resource areas...RIO under 18 (entered 16.88 on 9/29) adding under 8, and PCU under 19 entered 18.88 on 9/29) adding under 8 for 50% pops. SCHN under 28 (entered 27.99 on 10/6). UWM under 32 (entered 31.99 on 10/6) and adding under 24. IBM under 90 (entered 89.99 on 10/8) adding under 75, and HD under 19 (entered 18.99 on 10/10) adding under 13. Long the Euro under 1.3500 (entered 1.3498 on 10/6, placed break even stop on 10/7, exited 1.3808 on 10/9, +3.1 handles or $3750 per contract). If out I'll buy around 1.3450 to 1.3350 (entered 1.3400 on 9/10, stop places at breakeven on 10/12) adding around 1.2850 to 1.2650.


For what it's worth,

Ken

SLIPPERY SLOPE OF GLOBAL VILLAGE HOPE !

From the moment the House passed the Bailout Bill Friday, the Dow fell 470 to close at their lowest level since March 2007, reminding us that having money in the Blue Chips as been "dead money" for 18 months, now 28% off the year-a-go all time highs of 14,200. That number is -31% each for the S&P 500 and Nasdaq indices, which is more widely reflective of the "market" than the Dow. Since most your investments are not as diversified as these indices, you are probably down more than 31% in your investment and 401k's. Although most pundits will tell you that the average bear market in the past 100 years saw a drop of 28-34% so you should be buying here, that is a reckless argument. Just because the average bear was that number, the actual range of declines that are used to compute the average is much scarier than the average. Especially, the big ones in the 1930's, 1970's and early 2000's. Theses were periods when declines of 50% to 80% were common.

I'm hearing rationalizations like "if you think it's bad here, you should see Europe and Asia", which means we're relatively better than they are. But, if they decline 80% and we only decline 60%, is that tolerable? Not for me, which is why I've been on the sidelines with my safe money (CD's, money markets, and FDIC protected bank accounts) since summer 2005.

In case you missed it, California Govern-ator Arnold informed Treas. Sec. Paulson today that the credit markets are so stagnant that he'll need Federal assistance within a couple weeks to the tune of $7 billion to keep the biggest state in our country going. With many other states, counties, and cities in trouble, imagine the line up at the Treasury's door by the end of the year.

It's amazing that our government still hasn't admitted that we are officially in a deflationary recession, on the way to depression. Historically again, they'll do that within a few weeks of the ultimate bottom; finally admitting what we already know. Like I said in a blog post this week, when stocks, gold, silver, copper, crude, and real estate all decline together, that is deflation! When unemployment rises and payrolls plunge fall at the same time, along with government bailouts of the automotive and finance industries, that is recession. When they happen at the same time, that is the worst of all world: deflationary recession. And when it's a big one, like the 1930's in America, or the last 20 years in Japan, and many others in the past 100 years around the world, that is depression.

Action Steps: The "predictive" market theory used in our system has been preparing us for this decline for well over a year. It now tells us to expect a large corrective bounce higher to begin shortly, probably later in October. It's corrective because it will NOT come from the ultimate market low (unless there is an actual crash event in the next 60 days that brings the markets and economy to its knees), but from a trading low. This means that by the end of October/middle of November, with the Dow in the 8500-9500 range, the S&P in the 800-900 range, and the Nasdaq in the 1500-1700 range, a multi month oversold rally will arrive (sometimes known as the Christmas Rally) and "appear" to be the bottom. It will likely offer a very sharp rally and suck the ill-informed back into the markets, and/or convince the general public that "holding on" had once again paid off, and they've been saved again. To those that embrace it as a wonderful gift and look to lighten up on their losers below their break even levels, the gift will pay off.

The final market low will come in a few years when NOBODY wants to talk about stocks, own stocks, think about stocks, admit they own stocks, or be friends with anyone that does any of these. Like in the early 1980's, after 16 years of "net sideways" markets since 1966, including several 40-60% bear markets and several 60-100% bull markets, nobody admitted they owned stocks. It was all about CD's at 15-20% interest and buying real estate directly from banks for nothing down and just agreeing to make the payments. In 1982, which was the birth year for the bull market that advance the Dow from 700 to its 14,200 peak in November '07, very few Americans owned stocks. There were only a few mutual funds. It cost hundreds of dollars to buy a hundred shares of stock, unlike today's ten dollars per trade. There were no online brokers, discount brokers, or rich stock brokers. In fact, brokers were thought to be just below lawyers on the social pyramid (now barely above). You couldn't sell stocks to your grandmother who loved you unconditionally. That's how tough it was. Guess what? We need to get back to that to wash the system of the excesses that have built up in the past 26 years. When that happens, the best and last buying opportunity of our life time will present itself. Be ready.

Until then, if you are very nimble, objective, humble, saavy, and lucky, you can play many of the extremely violent up and down swings that are to come in the next few years in stocks, bonds, gold, silver, oil, euros, and maybe even real estate. Otherwise, get your money and mind ready for the gloomiest, hardest, scariest, toughest, and dangerous periods since The Great Depression. Will it get that bad? Who knows. But, unless you have certainty that it won't, isn't it better to be safer than sorrier?

Many will say that you can't afford to be out of the market, for when it turns higher, the big gains are made early. That is true of the past 26 years, when the greatest bull market in history was in it's final 26 years of it's 76 year life. But, if that great bull is finally gone, and we're in the correction of that entire move, then one year (since the 14,200 peak last Nov.'07) and only 28%-31% declines in the market averages is nothing compared to what it will take to correct the move from the 1932 Dow low of 39 to the peak of 14,200. The typical 50% correction will take the Dow to 7000. Since this was an "atypical" advance, logic would suggest that the correction needed will be atypical as well. My halucination points to 4,000-5,000 Dow, 500 S&P, and 500 Nasdaq. Like recent failures of WaMu, Lehman, AIG, etc., these stocks fell 50% per week from the time new investors bought in. If you bought WaMu because it was cheap on July 7 at 5.50, it was 3 by July 14. If you bought it at 3 because it was cheap, it was 1.50 by Sept. 14. If you bought it at 1.50, it was 50 cents by Sept. 25. If you bought it at 50 cents, it was 11 cents by the next day. There is always a way to get a 50% haircut on the way down. Those of you that were in the market during the Dot.com bubble burst, you know that you thought microsoft, yahoo, amazon, ebay, and all the others were cheap on their paths down from $100 or higher to $10 or lower from 1999 to 2003. Our human brains have enough trouble with arithmetic advances or declines, but very few of us can plan and execute in environments of geometric advances or declines. Know your strengths and weaknesses, and avoid situations where you are untrained or weak.

If you don't agree with me, that is okay. If you want to prove me wrong, just keep your funds in the markets for the next 3-5 years and invite me for coffee November 2012. If I was right, I'll buy, otherwise I'll need you to buy.

For what it's worth,

Ken

OOOPS, WHERE'S THE RALLY? BUY RUMORS, SELL FACTS...WATCH 10,000 !

The House just passed the bailout bill that the Senate did, and the market is falling again, off the +300 peak it was at when the vote ended...President Bush is about to speak and sign the new bailout bill, and possibly hint at the use of the backup plan that was prepared if a weak market followed the passage of the bill, but the market fell. That is likely to be a interest rate lowering of 1/2 to 1 full point (50 to 100 basis points). Let's wait and see. It would have to be very scary for him to announce the rate lowering, as it's Bernanke's job and turf.

Markets are very, very oversold, so this is NOT the time to be selling stuff you have held through the pain, or putting on "new bearish" trades. Use a 5-10% rally to lighten up on your dogs, and use any further 5-10% decline to put a "little" money to work for a trading rally. All eyes are on Dow 10,000 which is the psychological level of pain for most Americans. If we test that today, it'd better hold, or we'll see 9,000 in a hurry...maybe 8,300.

Oye Vey!

For what it's worth,

Ken

CASH AND FETAL...We're very close!

One of the CNBC commentators answered when asked where people should be to be safe in these markets..."the only two positions I feel comfortable in at this moment are CASH and FETAL". Although this seems like a funny answer, and one we can all relate to it, the extreme sentiment echoed in it speaks to the complete lack of preparation that the general public took prior to the current market slide that began a year ago.

Good News/Bad News: The good news is that a multi month bear market bounce in an ongoing multi year decline is very close to starting, and it will be huge.. The bad news is that it is only going to offer temporary relief for the markets, as they reset to slide later in this "deflation and de-leveraging" cycle. So, develop a plan quickly to use the bounce to reduce exposure to markets you are too involved in, and start thinking about preservation of capital, rather than return on capital for the next couple years. Otherwise, what has happened to your portfolio in the last year will seem mild compared to what will happen to it in the next few years...assuming I'm correct.

In a rare scenario today, gold, oil, stocks, commodities, and currencies all fell at the same time. How can this happen to historically uncorrelated markets you might be asking? Well, when huge brokerages, funds, and banks all get into the same trades on the way up, and all get margin calls on the way down, and no one is there to take the bad stuff off their books, they have to all sell the good stuff that has created profits for them recently. So, they can't sell mortgages and commercial paper and derivative garbage, they must sell crude, gold, euros, google, aaple, and anything else that is liquid.

2008 year to date numbers are just out: 98% of all mutual funds are down this year! That has got to suck if you are holding any, including the 401k statements you coming to you this week or next. Those that have been following this blog have avoided thousands of points of decline, several bankruptsy events, enjoyed stellar profits in short periods of time in stocks, crude, euros, metals, ETF's, etc. While the markets were swinging all over the place, we have forecasted things to buy and sell. Just lucky? Well, absolutely, as long as you remember that the definition of luck is "when preparation meets opportunity".

At 10,482, the Dow is almost 4,000 points off it's Nov.'07 peak. Most indexes are worst off than that on a percentage basis. When the decline is over, somewhere out in 2010-2013, the Dow will likely have entered the 4,000-6,000 range and the Nasdaq the triple digits. OUCH! Must it happen? No. But, the odds are favoring that it will. Therefore, use any rally into the end of the year or early 2009 to prepare for the most devistating selling cycle in financial, real estate, and commodity assets since the 1930's. And if you think it couldn't happen again, that the government will save the system, that there are safeguards in the system that will keep it afloat, think again. That fantasy should no longer be part of your consciousness after the incompetance we've seen in the last several years.

Be safe and remember the only two positions of safety: cash and fetal. Feel free to contact me if you would like more personalized help with your situation. Stay tuned for the mark of "a" bottom.

For what it's worth,

Ken

Another One Bites The Dust!!!! WAMU IS DONE !!!!

(click on chart to enlarge)
CHART AU COURANT: The first (top) chart is the monthly chart of how fast the mighty can fall ($44 to 18 cents in under a year). The lower chart is a close up of the anatomy of denial. It shows hourly bars for the last 3 months of WaMu's life, like the heart beat of a dying man, finally going to zero. So many lies were told during the last 3 months. So many promises broken. So much fraud. On the other hand, as I said in my comments on September 11, Wamu appeared not to have long to live. I said I was going to withdraw my money and move it from the worst bank in the country to the best bank, Wells Fargo. On September 16, my comments were titled "Panic Returns to Wall Street...Market Bottom Due This Week (at least short term)". The market bottomed on September 18th and rocketed 1200 Dow points in 10 market hours (the short term bottom was in). A week later, today in fact, the government has taken over the largest, worst run bank in the country, yes WAMU, and it no longer exists. GONE, Caput, Fini, TOAST! Who's next? Wachovia Bank (WB)? National City (NCC)? You can bet there will be more, even with the bailout package!
___________________________________

MARKETS: Luckily, and it may be due to the conspirators, WAMU didn't fail last week. If it had, with all the other catastrophic events going on, the odds are high that the system would have imploded, and the FDIC would not have been able to take it, causing the immediate run on most other banks in the country. As it was last week, there was a run on many money market funds, causing the FDIC to begin backing those as well, never done before. JP Morgan Chase will be your new bank, if you had funds in WAMU, which is a good thing. As for Kerry Killinger...good luck in prison, as your days under the microscope have just begun.

As the government on both sides of the aisle play their positioning games at the stake of us poor tax payers, the markets have had enough of the circus. The BAILOUT package is needed to rescue the "system", but will likely usher in selling by the fact that it further degrades the dollar and inflates the national debt. The credit markets are frozen in time, and are dictating the future of the stock market. Since it will take a while to fix the credit markets (at least months, not weeks), the stock market is extremely unlikely to bottom anytime soon, for more than a day or three.

THE MARKETS ARE AT THE HIGHEST RISK OF A CATASTROPHIC SELLING EVENT SINCE 1987. If our lawmakers play politics too long (and I means in hours, not days), we are going to see the "BIG ONE"!

Any break of Dow 10,500 should launch a landslide of selling to at least the 9,500 area, more likely 7,500-8,000 (another short term bottom should be created here). Only an immediate move above 11,500 will postpone the coming slide (perhaps allowing 12k to 12,300 in a panic to buy like last week), which could easily slash another 2,000-4,000 off the Dow this year.

(closed trades are always in black type)
INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL: Currently, there are no open short positions, which usually happens close to market lows. But, stay tuned. We took amazing profits into the Freddie/Fannie failure and will re-short on a reasonable rally. Looking to short the Euro near 1.4900 or higher, near Fibo 50% of prior decline.

INTERESTING PLAYS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See September 19 posting for profit taking on a lot of former trades. BX under 11, GS under 85, MSFT under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG under 390 (entered 389.50 on 9/28, using break even stop as of 10/2, exited at breakeven on 9/29) and under 290, EBAY under 19 (entered 18.50 on 10/6) and adding under 12, DELL under 17 (entered 16.50 9/16) and adding under 10, SMH (entered @ 25 on 9/15 at market open) adding under 21, SLV under 10 adding under 7, SBUX under 13 (entered 12.99 on 10/6), RIMM under 95 (entered 94.99 9/16, exited 99.99 on 9/25, +5.00 or 5.5%) but will re-enter under 63 (re-entered 61.18 on 9/29, stop set at breakeven 10/2, exited breakeven on 10/6) re-entering under 53 (entered 52.99 later on 10/6) and add under 41, AAPL under 135 (entered 134.99 9/16) adding under 90 (entered 2nd time 89.99 on 10/6) and under 65 , INTC under 19 (entered 18.99 9/16) adding under 14. CRM under 45 (entered 44.99 on 9/29) adding under 32. SBUX under 13 (entered 12.99 on 10/6) and adding under 8. And, new additions in the natural resource areas...RIO under 18 (entered 16.88 on 9/29) adding under 8, and PCU under 19 entered 18.88 on 9/29) adding under 8 for 50% pops. SCHN under 28 (entered 27.99 on 10/6). UWM under 32 (entered 31.99 on 10/6) and adding under 24. Long the Euro under 1.3500 (entered 1.3498 on 10/6, placed break even stop on 10/7) adding under 1.3000.


For what it's worth,

Ken

1930's...AGAIN? Bernanke Thought So This Week!!!

Fed Chairman Bernanke, THE undisputed expert on the Great Depression, evidently felt so scared of seeing that scenario unfold this time, that he and Pres. Bush, Treasury Sec. Paulson, SEC Chairman Cox, and at least several hundred lesser knowns put together the "everything including the kitchen sink" bailout package (which is being called the stabilization package so they don't have to say bailout) of the century this week. This has changed the rules that have been in place for 70 years. And, we don't know the particulars yet. Only the headlines were disclosed in an attempt to turn the markets, which worked so far. Did they put on a bigger bandaide or fix the problems? Most likely, this is another bandaide. They say the money markets are now covered under FDIC, and that the Government (you and I) will be taking half a Trillion (with a T) of bad mortgages off banks balance sheets. Wow, I guess the Darwins concepts of evolutionary survival of the fittest no longer apply to American business, banking, or speculating. It's now okay to be a blundering idiot and destroy other people's lives and net worths, and be backed and bailed out by good old Uncle Sam.

THIS IS NOT GOOD NEWS...WE SHOULD NOT BE CHEERING !!!

Coming so close to financial collapse, for the US and other countries, is nothing to celebrate. Are our systems and products too advanced for our regulators and leaders to control? Apparently! Check out the list below of all the longs I sold prior to the open on the hype of the "stabilization". I got huge one and two day moves, and must exit, as I don't understand the new rules of the new game. When I do, I can play again.
__________________________________________________

(closed trades are always in black type)
INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL: Currently, there are no open short positions, which usually happens close to market lows. But, stay tuned. We took amazing profits into the Freddie/Fannie failure and will re-short on a reasonable rally. Looking to short the Euro 1.4900 or higher, near Fibo 50% of prior decline.


INTERESTING PLAYS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3, exited at breakeven premarket 9/19) and adding under 400, EBAY on break back above 22 (lower from 24 on 9/15) (entered 21.99 on 9/15) and adding under 17, SNDK under 12 or above 15 (entered 15.01 on 9/5, using 13.48 stop as of 9/10, exited 24 premarket 9/19, +8.99 or 59%), GRMN under 30 or above 35 (down from 36 on 9/16, entered 35.01 on 9/18, using breakeven stop as of 9/19), DELL under 17 (entered 16.50 9/16) and adding under 10, SMH (entered @ 25 on 9/15 at market open) adding under 21, SLV entered 10.75 (exited 12.45 9/19, +15.8%)...I'll reenter 11.75 and add twice this amount at 8.75. GS under 118 (entered 117.48 on 9/16 6:09 am, exited 139.80 premarket 9/19 +22.32 or 18.9%) or above 130 and adding under 88 (lowered from 95 on 9/17), C which is riskier than most below 15 (entered 14.99 on 9/17, exited premarket 9/19 @21.99 +7 or 46%). GE under 23 (entered 22.99 9/16, exited 29.49 premarket 9/19 +6.50 or 28%), MS under 18 (lowered from 24 on 9/17) (entered 17.99 on 9/17, exited premarket 9/19 @34, +16.01 or 88% ), JEF under 14 or above 19 (entered 19.01 9/17, exited 28 premarket on 9/19, +9, or 47%), SBUX under 13 or above 17, UWM under 43 or above 46 (entered 46.01 9/16, exited premarket 9/19 @ 55, +8.99, or 19.5%), RIMM under 95 (entered 94.99 9/16, exited 99.99 on 9/25, +5.00 or 5.5%) or above 100, AAPL under 135 (entered 134.99 9/16) or above 140, INTC under 19 (entered 18.99 9/16) or above 21.


In Crude, I will buy any test of 100 +/-2 or a break above 112 now (entered $101.78 on 9/10 and stop is now breakeven as of 9/19 at 11a PST, exited 109.08 10:40a PST, +$7.10 or $3505 per contract) adding near $90 (added $90.98 on 9/16 @4:30am PST, exited this second position only $96.98 on 9/17 11:28a PST, +6 handles or $3000 per contract). Standing aside as of 9/22 10:44a.


Re-entered the Euro at 1.4439 @ 8a on 9/3 (exited 1.4539 on 9/18, +1 handle or $1250 per contract) and I'll add second entry back if under 1.4050 (added 1.4049 on 9/15 @ 4am PST, stop on this second position only at 1.4000 entered 11am PST, exited this position only 1.4359 on 9/17 @11:44a PST, +3.1 handles or $3875 per contract), standing aside now to see how things shake out or buying under 1.4200 (entered 1.4199 on 9/19 4:30a PST, exited 1.4649 on 9/22 9:26a PST, +4.5 handles or $5,625 per contract, as bounce pattern looks corrective, and everyone calling for further immediate move higher).


For what it's worth,


Ken

PANIC returns to Wall Street...MARKET BOTTOM DUE THIS WEEK (at least short term)

(click on chart to enlarge)

CHART AU COURANT: Following up on the headline from last post, at least a short term low is due this week for the stock markets in the US of A. This chart of VIX is how the "street" measures panic. It's the price of buying insurance against the worst case scenario. So, when VIX is low, the street is NOT fearful of things they don't know about. When it's high, they are very, very worried about disasters they don't know about. However, it's like child psychology: when you want your child to do something, you tell them not to. Here, the street (which is all of us put together) never buys the panic insurance until the disaster they didn't know about happened. That would be like finally buying your earthquake insurance after the big one hits. Stupid, right? So, we use VIX to tell us when the disaster is over or nearly so. Look above...you see the spikes in the past above the 30 level are rare, and above 35 are very rare. In fact, VIX has never closed above 35, and only closed above 30 a handful of times in its history. When it's up this high, it's telling us that street is paying too much for insurance against disaster, and it's time for a reversal in the next day or two! In addition, the stochastics are extremely extended above 90, which is also rare. Finally, the VIX is approaching the 4 standard deviation band. The only time in history that the VIX closed above this band was in August 2007, when it actually rose to the 6 standard deviation band for a few minutes. That panic low led to a 1700 point Dow rally (13%) and 200 point S&P rally (14%) in the following two months. Don't get me wrong. Nothing is for sure, but I point out that this is what short term bottoms often look like, at least in the past several years. On the other hand, very rarely, panic like this is actually ahead of the actual disaster. If that is the case this time, imagine what the disaster will be, considering what we know so far.

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INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL: Currently, there are no open short positions, which usually happens close to market lows. But, stay tuned. We took amazing profits into the Freddie/Fannie failure and will re-short on a reasonable rally.

INTERESTING PLAYS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3, exited at breakeven premarket 9/19) and adding under 400, EBAY on break back above 22 (lower from 24 on 9/15) (entered 21.99 on 9/15) and adding under 17, SNDK under 12 or above 15 (entered 15.01 on 9/5, using 13.48 stop as of 9/10, exited 24 premarket 9/19, +8.99 or 59%), GRMN under 30 or above 35 (down from 36 on 9/16, entered 35.01 on 9/18, using breakeven stop as of 9/19), DELL under 17 (entered 16.50 9/16) and adding under 10, SMH (entered @ 25 on 9/15 at market open) adding under 21, SLV entered 10.75 and adding twice this amount at 7.75. GS under 118 (entered 117.48 on 9/16 6:09 am, exited 139.80 premarket 9/19 +22.32 or 18.9%) or above 130 and adding under 88 (lowered from 95 on 9/17), C which is riskier than most below 15 (entered 14.99 on 9/17, exited premarket 9/19 @21.99 +7 or 46%). GE under 23 (entered 22.99 9/16, exited 29.49 premarket 9/19 +6.50 or 28%), MS under 18 (lowered from 24 on 9/17) (entered 17.99 on 9/17, exited premarket 9/19 @34, +16.01 or 88% ), JEF under 14 or above 19 (entered 19.01 9/17, exited 28 premarket on 9/19, +9, or 47%), SBUX under 13 or above 17, UWM under 43 or above 46 (entered 46.01 9/16, exited premarket 9/19 @ 55, +8.99, or 19.5%), RIMM under 95 (entered 94.99 9/16) or above 100, AAPL under 135 (entered 134.99 9/16) or above 140, INTC under 19 (entered 18.99 9/16) or above 21.

In Crude, I will buy any test of 100 +/-2 or a break above 112 now (entered $101.78 on 9/10) adding near $90 (added $90.98 on 9/16 @4:30am PST, exited this second position only $96.98 on 9/17 11:28a PST, +6 handles or $3000 per contract). I'll add it back under $89.

Re-entered the Euro at 1.4439 @ 8a on 9/3 (exited 1.4539 on 9/18, +1 handle or $1250 per contract) and I'll add second entry back if under 1.4050 (added 1.4049 on 9/15 @ 4am PST, stop on this second position only at 1.4000 entered 11am PST, exited this position only 1.4359 on 9/17 @11:44a PST, +3.1 handles or $3875 per contract), standing aside now to see how things shake out.

For what it's worth,

Ken