Tuesday, August 9, 2011

Is this finally the bottom?

I think QQQ's can get to $55-56 as a 1st target and $58 as the top target. If QQQ's close below $50 then I believe we have a hard move down and I will look for stocks to short.

Could we have a bottom in place on the Nasdaq QQQ's ? I think we may have a short term bottom for now. It looks like the markets welcomed the news that Fed have decided to keep rates near 0% till 2013. Now no one really knows the true reason for the rally and I have noticed through the years that news outlets like to make up reasons for all the movements that go on in the markets with no real confirmation other than talking to a trader somewhere and that's what they think is going one but the market is not made my any one person. But anyway back to what we were talking about. Buyers could come back to the market now that they have confirmation rates will remain low for the forseeable future. So why is that? Well if you know rates are gonna be at 0% for the next two years then why stay in T-bills and money markets. You definitely can make more from stocks even conservative blue chips that are now paying 6% dividend yields.

This is what we know. The market is heavily oversold, blood and fear is in the streets and the Fed pretty much said they will do anything to support the markets. I have seen this happen before and one thing I know is don't cross the Fed. If they want something to rally it will and if they want something to fall it will. It might not happen right away but it eventually will. They have a lot of tools at their disposal and are very big force to go against. In the dot com bubble the Fed wanted to slow the over heated economy at the time and said the will raise rates to slow down the economy. So what did the crazy market do? It rallied and rallied, it pretty much blew off the Fed. So naturally what did the Fed do? They pretty much raised rates until the market got the picture that the Fed was just gonna keep on going till the market dropped. That move led to the dot com bubble bursting and to a big short position for me. The Fed then wanted to support the waek economy and prop up the market. So what did they do? They keep on lowering the rates which led to the strong rally that preceeded the financial crisis.

Does this sound familiar? Markets have a tendency to repeat themselves and now the Fed wants to support the market. I believe not only the Fed but the government will do anything to prop up this economy and we could see a pretty good bounce back. Now for me to remain bullish I still want the markets to hold above the lows made today.

No comments:

Post a Comment