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Monday, December 8, 2008

Market Rally Continues

On Friday, the job report was arguably the worst job report in 125 years. The official stance is worst report in 30 years, however how the job report numbers are compiled are different now than 30 years ago. If the method of tracking unemployment was constant in the last 125 years, this past Friday's report was possibly the worst.

And yet, the market rallied!

Why? Cause the market has been and continues to trade on emotion of people. At this point, if you haven't sold stock your holding, guess what? You NEVER will!

After the meltdown of Sept, Oct, and November, frankly, there really isn't anything that could come out to scare the remaining stock holders to sell. Sure hedge funds and other institutions over-leveraged may be selling, but the masses, with their 401K money, are in it for the long haul.

Those that did sell, are eager to jump in to "not miss" the boat when the market rebounds. So there aren't any sellers and people just itching to make a quick buck on a rebound.

Plus, the government announced what I consider a deathblow to ensure a Great Depression on Friday, and that is, the FED is now buying ABS (Asset Backed Securities - aka junk mortgages) from Freddie Mac & Fannie Mae. The Fed just bought a little, but I'm sure that's just an appetizer to see how well it's received by the market. And it was received well with a rocket launch on Friday.

This new trick should go on until Obama enters office, continually announcing buying worthless paper for billions to inject market rallies as needed.

As you can see on the chart, the market is still between the levels I have been discussing for a few weeks. I expect DOW 10K by the time Obama takes office. However if we rally this entire week, I will lighten my positions by Friday, in anticipation of some less than holiday cheer news may come out over the weekend.

I'm still hanging onto GDX, but starting to get concerned over Gold's valuation. Since everyone on Friday Said oil is going to continue to slide, I took the contrary position and bought DXO, a double long of OIL, and FAAS, a tripple long of financials.

I skipped the weekend news, plenty to report, but at this point, the market doesn't really care about bad news from companies it values, only good news will get full press.

As for what happens after Obama takes office, if he acts boldly and doesn't try to print paper to fix the us, but "re-invents" the US, the US can get out of this in 5 years or so. Karl at Market Ticker Blog (click here) has an excellent rant on shaking the system up, which I of course, don't believe will occur.

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