Trade Ideas for 10/14/08

They say that all bear markets are different, but one thing they seem to have in common is unbelievable countertrend rallies. As I wrote on Thursday,

Bear market rallies are sharp and take place over short periods of time. But the swing in price could be so dramatic that it's worth it to me to try and play it.

Today's rally smashed the previous one-day point gain on the Dow (almost quadruple digits), and futures are showing triple-digit continuation tomorrow as of this moment. I hope you were able to make some money based on my blog posts, first by getting out of the short trade Friday, then with the suggestion to go long Friday and finally with today's trade ideas, 4 of which were elected. All credit to Andy Askey for another in a long line of legendary calls. He had pinpointed 10/10/08 as the turning point as early as April of this year on his blog, and elsewhere earlier than that.

Now that the market has completed Primary A, it's time to turn our attention to what's to come. Short-term there's the upcoming pullback to consider. We are currently tracing the first wave off Friday's lows. The first wave of a move can correct up to 99% in what is variously called a double dip, a double bottom and a dead cat bounce. We still haven't seen the top of the current explosive move, but it could come as early as mid-day tomorrow. That's right, you can't breathe a sigh of relief yet. Looking out medium-term, we are going to go higher for a little bit, probably at a 45 degree or flatter angle, which is the signature of a B wave. Primary B could last anywhere from 3 months to a year, but according to E-Wave it cannot get any higher than the Intermediate Wave B high of 13,137 (DJIA). 11,000 is an attainable target. That's still quite a bit of upside, but the main point is that the high will hold. In fact, according to Elliott Wave, neither in our nor in our children's lifetimes shall we see the Dow above 14,000 again.

During Primary B, consider accumulating physical gold in your long-term account, and prepare to sell all your non-gold longs by the end of it. During Primary C (to complete Cycle Wave A), we are probably going to see hyperinflation. Also the market will experience a crash even worse than last week's; specifically it'll be worse by a degree. Many people believe that gold is a hedge against inflation, and since a deflationary recession is upcoming, they believe gold won't be of use. In fact, gold is a hedge against monetary inflation, which means Bernanke using his storied printing press and debasing the currency. By supplying an unlimited source funds to banks, governments around the world are demonstrating their commitment to debasement of their money. As a trade, gold doesn't look good right now. DZZ (Double Inverse Gold ETN) actually has a good setup for tomorrow, in fact. But as part of a long-term portfolio, gold has never been more imperative.

Turning now to today's elected trades. WB gapped up on open but touched down to our buy price, so it gets a spot in the table. UWM never did come back down, so I've omitted it. The others traded up to their entry prices. Too bad the risk was so wide, because even though the percentage returns look good, those of you who elected the positions know that you weren't able to buy very many shares. Especially with WB, which you would've had to reduce even further since it traded down, rather than up, to the entry price.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
WB	5.21	5.85	+12.3%	4.29	Consider selling on a close < 5.15	Chart
JRCC	18.93	21.25	+12.3%	14.89	Consider selling on a close < 18.40	Chart
RIMM	62.38	63.87	+2.4%	50.21	Consider selling on a close < 59.56	Chart
WFR	24.83	27.22	+9.6%	19.99	Consider selling on a close < 24.00	Chart

Plenty of nice-looking charts for tomorrow. The only risk is that upcoming pullback dangling over us like the sword of Damocles. I'm only giving out two since we hold so many already. Email me if you want some of the other ideas on my list.

Trade Ideas for 10/14/08

Ticker	Entry	Exit A	Exit C	Chart
FORM (FormFactor)	18.46	17.24	15.26	Chart
SONS (Sonus Networks)	2.61	2.39	2.06	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.