~ July 22, 2008 IMPORTANT UPDATE!!!

Below is an article I wrote Monday and published Today (Tuesday, July 22, 2008).   In it, I told you to sit tight, and that I would let you know when it's time to get bullish.  Well with today's market action, I am now seeing all that I need to see from my indicators to tell you that NOW IS THE TIME TO GET BULLISH.  This couldn't wait until next Tuesday's article. GO!  (Remember, markets typically don't go straight up.)  You are welcome to join me at The Trend Rider!

This one will be pretty short folks.  I'm buried up to by eyeballs in some serious stock market research.  Why?  Because I think we are nearing the time to switch gears and get bullish again for the intermediate term.  I'm thinking as soon as I get the signals, we are going to have a LOT of fun.  There's an awful lot of money on the sidelines right now waiting for the right time to buy.  Not only that, but there is a TON of short-stock that investors are strongly considering covering.  That means they have to buy a tremendous amount of stock to exit their bearish positions.  That would add tremendous upwards pressure to the market in addition to new buyers.

On May 27th, I recommended that you buy the SPDR S&P December 148 puts as a hedge against a decline in the S&P500 (Symbol JBG XR).  The put option at the time was $14.80.  The last closing price was at $22.20 bid $22.50 offer.

The market should open lower given the slew of negative earnings announcements after hours today (I'm writing this Monday, the day before you read it, so things may change by the next open of U.S. markets).  But if you recall, I said to sell the put option when the VIX jumps over $30 and then reverses lower in a meaningful way. That happened on July 16th and on that day, the put option traded between $24.60 and $26.95.  The average is $25.77 which is a 74% gain in 2 months.  If you haven't yet exited the position, I'll bet that the put options is up from the last closing price and I think you should exit it (sell the put to close).

Recall that I said you would want to have some cash on the side for when the market sells off.  Well the market is showing several signs of a bottom, and next Tuesday I will tell you if it's time to get bullish yet.  I can't tell you exactly what to get bullish on though.  You'd have to sign up to The Trend Rider for that, and I have some pretty big plays that I'm close to recommending. 

We just might get one more fast sell-off here, but I wouldn't be very bearish given how oversold we are.  The NYSE High Low index just hit a 21 year low.  When this reverses back up it's a very bullish sign.  The Investors Intelligence Advisors Sentiment Indicator is at levels not seen since 1994 overly bearish (which is a bullish sign).  And my internal indicators are showing that we are extremely oversold.  Believe it or not, recently, about 80% of stocks listed on the NYSE were below their 30-week moving averages!

So you could get hurt being bearish here.  Just get ready to take a nice ride to the upside when my indicators turn up.  It's like a spring that's very coiled, and the more coiled it becomes, the bigger the jump higher typically is.  I'll keep you posted next Tuesday, but until then, don't be trigger happy.  Don't worry about trying to buy the exact bottom.  It's too dangerous.  Wait for my confirmation and then we'll go to town together!

Anyone disagree?  Leave a comment by clicking below. 


“Profit from the Trend”

Chris Rowe
Chief Investment Officer
<>