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Friday, December 12, 2008

Debacle Friday

The US Government after guaranteeing Trillions of debt, and giving billions away to reckless banks and financial institutions, has said no to GM for 15 Billion dollar "loan". To me, this is a real thumb in the eye to blue collar america as white collar america gets loans with minimal strings attached. If this was the 50's there would be riots in the streets for the double standard. But America has been domesticated and it will be business as usual. The stock market should react extremely bad, possibly the stock market will hit "locked down" levels and be forced to shut down (cool off) on the huge down day.

Any profits from GDX, DXO, and other stocks should evaporate instantly. Hopefully GDX will stay above 20, and DXO above $2.50.

The following Saturday is options expiration. Assuming Friday is a complete debacle, I may buy some stock option calls EOD Friday to hedge if market rallies next week as "lottery tickets".

I may also sell (just a little) GDX/DXO to lighten my positions, but in general still bullish in next 5 weeks on both. But for the near term, I am now pretty bearish.

What is more annoying for me is I was shorting the market for last two years, and each time a bailout was announced, it passed, and screwed me financially. Now that I am long, the bailout fails, screwing me financially.

No point in dwelling on the powers-that-be, best to keep calm and trade as needed.
The next 7 days will be interesting at best. Good luck.
And it can't hurt to put stop orders on positions to ensure losses are minimized.

UPDATE Friday AM: Market down, but obviously I over-reacted just a tad. In my defense the futures last night shows the DOW down 450. However today is not as bad as I feared. Today will be the classic battle of "Greed vs fear" that each of us will face. I'm still a bull next 1 to 2 months. Since next Saturday is options expiration, the market typically would not go "straight down" into options expiration. Then again, what has been typical this year? I am putting low bids in today to buy more.

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