Trade Ideas for 10/23/08

Well, so much for upside. While we're still above the lows of 10/10 and those of 10/16, the picture has really changed with today's action. There was bad news, yes, but at market bottoms we need to see the bad news being bought, not sold. With sentiment so negative, we might not see the lows hold. Below is a chart of the crash of 1929.


Note that in late October 1929, what looked to be a bottom was put in, followed by a dead cat bounce and what looked to be the beginnings of a rally; only for the market to plunge anew. We might be in the same boat currently. Here's the current picture:



Even if the lows do hold, it would require quite a change of appetite to see significant positive price action. Too much damage was done today; if people were hesitant before, they're scared to death now; if they were scared to death before they're comatose now. This puts us in a wait-and-see position, rather than one of opportunism.

We're still holding on to one position, the rest having been sold in today's slaughter. It's painful to let go of holdings at a loss, but by the same token the sell-stops protect small to medium losses from becoming gigantic ones. What seems like a painful parting at the time often turns out to be a lifesaver in hindsight.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
SPR	14.01	13.51	-3.6%	12.98	Consider selling on a negative close	Chart

A couple of very wide-risk ideas, but that reflects the environment we're in, with every other day's action a Top 10 one-day gain or loss record on the Dow.

Trade Ideas for 10/23/08

Ticker	Entry	Exit A	Exit C	Chart
SPY (S&P 500 ETF)	99.11	90.63	86.49	Chart
SH (Short S&P 500 ETF)	94.91	82.99	78.36	Chart

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