What an day yesterday was!

On the whole, it was a lot of work just to get back to Monday’s open but what fun it was riding the market down 900 points for 3 days and 4 hours, only to have it all reversed in the next 180 minutes.  Were we oversold then?  Are we overbought now?  Both David Fry and I thought the rally was, in David’s words "too pat" where "every trading desk, hedge fund and not doubt the  government had their fingers on the BUY button as soon as 8,000 on the DJIA was breeched."  Ahead of Bush’s speech yesterday afternoon, I had said to members: "Bush is speaking a little later so maybe the PPT is standing by to try to buff up the legacy a little…  I liked what we saw on that run to 8,400 before - just because we got rejected there doesn’t mean they won’t go again."

We had been, as I mentioned in the morning post, taking our short side profits even as the Dow broke below our 8,200 target and we added another round of positive plays as we flipped 60/40 bullish at 8,400.  That went, of course, amazingly well already but I quickly raised our goals and, as it stands now, we are not going to be happy with anything less than a test of 8,900 this morning and holding 8,800 is now a must otherwise we’ll be upping our short-side positions ahead of what may be a disappointing G20 meeting. 

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Once again, everything is proceeding exactly as I have foreseen.

On Monday afternoon, I said: "S&P must hold 900 of course, no sense in making a play to the upside as the danger of gapping below 900 and triggering a massive sell-off looms for tomorrow.  Since we’re 300 points away from getting back to today’s open, there’s not much of a sense of urgency to reposition here" and our bearish outlook has served us well the past two days as we did indeed fail to hold 900 on Tuesday’s close and we did indeed gap down into a huge sell-off, heading for our 840 target test along with the Dow 8,200 line I said would be our BUYBUYBUY point.

With Monday’s DXD Dec $65s at $19.70 (up 67%) it’s mission accomplished on the short side and we looked to rebalance to 50/50 in yesterday’s sell-off and discussed the idea of moving to (dare I say it?) 60:40 bullish if we hold 8,200.  To that end, I listed 22 hedged plays for members in yesterday’s post based on yesterday’s very important educational post: "How to Buy Stocks for a 15-20% Discount."  Of the group of diversified dividend payers, that includes, MSFT, WMT, KMP, PRU, KFT and even the horribly performing GE - the …