Saturday, June 28, 2008
The Dow undercut its March and then its January lows settling around 11,346. The Dow is down almost 1700 points since mid May. The transports have cracked 5000 though this index is holding up much better. Banks and GM are finally being downgraded to sell. Only weeks ago you heard the mantra, stocks are cheap, its close to the bottom and all that other crap. Now reality has set in. Some hedge funds which are highly leveraged and bet wrong have to be in trouble. The VIX is no where near panic levels. Barron's has resigned itself to the belief that the financials won't recover until 2010. Wall Street analysts are biased, and therefore worthless. The only truth is in the charts. While a rally could surface some time in July, it should be a bear market rally which should be used to sell stocks and originate new shorts. A Dow rally into the 11,800 to 12,100 area would be the sweet spot for this action plan.