Trade Ideas for 12/08/08

Friday's action was encouraging. The jobs number came in over 50% worse v/v already very negative expectations. While the market sank, weighted down by this dose of bad news, it didn't break down. December's lows were tested, but not November's. Maybe, just maybe, the market has priced in some of the more pessimistic eventualities. If it has, then it can conceivably start to chug higher, climbing a wall of worry, provided news doesn't get appreciably worse in degree. Who knows, we might even get a rally this week. Here's a look at the chart of the SPY:


Friday was kind of an outside reversal day, and with any luck we're set to move in the next couple weeks above the Thanksgiving high. To see some higher highs and higher lows would be great, but if we get a huge surge early on, I'd look to take profits. Ideally, it'll be a slow building.

Primary B, the big rally that I'm hoping for, is actually rather modest in the grand scheme of things. New highs are out of the question, and what's to unfold won't even be close to a double top. Something like a 20-40% increase from today's prices; an SPY target of, say, 110-120. With reference to the crash of 1929, here's where I think we might be:


Not a long rally, nor a spiky one, really just a kickback type of rally writ medium-large. But it should give us prices we haven't seen since early fall, and that we maybe won't see for the rest of our lives.

As for our holdings, the short side bets didn't work out. SH was entered and exited; SMN fared better, giving us a thrill as it soared above 100 before collapsing. SMN went parabolic on the heels of the jobs news; the fact that SH didn't was a divergence worth noting. One thing it tells me is that, for the time being, retail, financial and consumer have more strength than basic materials. We're still officially in SMN, and anything can happen, but it doesn't look good for the shorts. Our other holdings did well.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
AN	7.01	9.51	+35.8%	8.46	Consider selling on a breach of Friday's lows	Chart
VMC	64.01	66.75	+4.3%	63.25	Consider adding above 67.21, risking to 63.25	Chart
DAL	8.88	10.36	+16.7%	8.61	N/A	Chart
SMN	93.81	84.90	-9.5%	83.99	N/A	Chart

For Monday, a couple more old-line economy ideas to add to our collection, as well as a tech stock with a promising chart.

Trade Ideas for 12/08/08

Ticker	Entry	Exit A	Exit C	Chart
ORI (Old Republic)	10.01	8.98	N/A	Chart
JWN (Nordstrom)	13.06	11.25	N/A	Chart
ARRS (Arris Group)	7.31	6.44	6.24	Chart

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