These past few months have been extremely difficult to trade. The swings have been violent, and if you haven’t been on the right side of the moves, the draw downs can be staggering. I’ve been fortunate and have been able to mitigate a lot of the nasty losses a market like this can bring about.
As you can see from the chart below, we have started to see daily volatility subside a bit and it looks like the indicators are beginning to point to a slight bullish bias. My personal belief, and that of my trading accounts positions, is that we are in for a Christmas rally. Take a look at the chart…
S&P 500 - December 15 Daily Chart
You can see that the MACD is just about completely positive, and today’s close puts us just above the three DMA’s. Give that, and the generally light holiday volume, I would not be suprised to see a slight drift up for the next few weeks.
This week in particular is going to be a harsh one. With the two-day fed meeting, the possiblity of an auto bailout, options experation and a host of new bites… we are in for some serious movement. That of course is compounded by low volume and the ability of the few big-boys left in town to do some serious market manipulation. Just look at a daily chart for the /ES today to see what I’m talking about.
Anyhow, the holiday spirit is abounding and I’m thinking we drift higher. My post a few days ago indicates that I’m heavy into 2x Bullish ETF options right now. I’ve also hedged the papermoney account with a largish position short China as I firmly belive that we are going to be in for much more bad news come 2009.
