11/26/09 The BullBear Market Report SPECIAL REPORT

Please comment and discuss!

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Permalink Reply by BullBearGirl on November 27, 2009 at 2:36am

Great Special Report. Thanks for going above and beyond on a holiday.

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Permalink Reply by Steven Vincent on November 27, 2009 at 3:00am

Everything is getting hammered hard across the board tonight. US markets are going to gap down and sell hard on a Friday when everyone is on holiday. At some point the governments, banks and IMF are going to put together a Dubai rescue package. Could come on Friday or over the weekend. That will be the cue (perhaps together with a happy "Black Friday" report on Monday) for a rally. It is into that rally that we should be looking to get short and/or long the dollar. Regardless I think this is the beginning of a trend change in markets that would have happened anyway; Dubai is just the spark.

I am beginning to give the deflationist view more weight.

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Permalink Reply by BullBearGirl on November 28, 2009 at 3:11pm

Just to clarify this - what you are saying is we should go short the stock market and/or long the dollar.

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Permalink Reply by Steven Vincent on November 28, 2009 at 3:20pm

I think that you could take both positions simultaneously. The inverse relationship should persist. However, I don't think we have enough to try to take a position yet. We need to see how the market reacts to a Dubai bailout--or lack thereof. The fear generated by the Dubai thing could have been enough to push the market to new highs rather than break down. Patience is a virtue and in the markets a necessity. Let's wait until the market gives us more info.

I do note that the Russell 2000 and financials did outperform to the downside on Friday by a wide margin closing near the lows of the day. The RUT:INDU ratio continues its plunge unabated.

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Permalink Reply by Steven Vincent on November 28, 2009 at 3:34pm

Abu Dhabi Will Aid Debt-Fraught Dubai 'Case by Case'

http://www.cnbc.com/id/34180711

This could be slightly bearish for markets since there is probably the expectation that there will be a complete bailout and international response. If there is an international "Lehman" and Dubai is allowed to fail (no international government/central bank/commercial bank/investment bank/IMF coordinated response) then panic could ensue. So far we have a half hearted promise of support from a single neighboring country. Not, I think, what markets will be looking for. But we shall see.