Trade Update - SKF

I stuck with the plan and sold my SKF today at 138.10 (bought at 106), for a nice 30% gain in about 5 weeks.

News Headlines

Hmmm....Let's take a look at today's news headlines, and you tell me if it looks like things are getting better:

GOP Stands Firm, Putting Auto Bailout in Doubt
By DAVID M. HERSZENHORN and DAVID E. SANGER WASHINGTON - The prospects of a $14 billion government rescue of the American auto industry seemed to vaporize on Thursday morning as the Senate Republican leader, Mitch McConnell of Kentucky, ...

Recession seen worsening
Reuters - 4 hours agoBy Jim Christie SAN FRANCISCO (Reuters) - The "nasty" US recession will tighten its grip next year as unemployment rises and weak home and stock prices imperil consumers, finance firms and debt-laden businesses, a UCLA Anderson Forecast report released ...

US Household Net Worth Fell Most on Record in Third Quarter
Bloomberg - 1 hour agoBy Shobhana Chandra Dec. 11 (Bloomberg) -- US household wealth fell from July to September by the most on record as property values and stock prices tumbled, Federal Reserve figures showed.

Foreclosure Storm Will Hit US in ‘09 Amid Job Loss (Update1)
Bloomberg - 1 hour agoBy Dan Levy Dec. 11 (Bloomberg) -- US foreclosure filings climbed 28 percent in November from a year earlier and a brewing “storm” of new defaults and job losses may force 1 million homeowners from their properties next year, RealtyTrac Inc. said.California has highest total number of foreclosure filings in November Bizjournals.comForeclosures dip - but hold the applause CNNMoney.com

Jobless claims jump to 573000, a 26-year high
MarketWatch - 4 hours agoBy Rex Nutting, MarketWatch WASHINGTON (MarketWatch) -- The US labor market weakened further last week, with the number of first-time filings for state unemployment benefits jumping by 58000 to a 26-year high of 573000, the Labor Department reported ...

US Exports Fall More Than Two Percent
Washington Post - 3 hours agoBy Howard Schneider US exports tumbled in October as a collapse in global demand for goods and services undermined what in recent months has been an important prop for an otherwise shrinking economy.Trade Deficit in US Widens as Exports Decrease (Update1) BloombergDeficit of $57.2 billion is wider than forecasts; oil imports jumped MarketWatch

KB Toys Files Bankruptcy, Citing ‘Sudden’ Sales Drop (Update2)
Bloomberg - 38 minutes agoBy Steven Church and Heather Burke Dec. 11 (Bloomberg) -- KB Toys Inc., the 86-year-old toy retailer, filed for bankruptcy with plans to shut its 277 stores, citing a “sudden drop” in sales.

Costco Doesn't Expect To Meet Analysts' 2Q Profit Estimate
2nd UPDATE: Lilly Sees Slower 2009 Sales Growth, Big 4Q Charge
Krispy Kreme Q3 loss widens
Ciena Posts Loss as Customers Push Back Orders


This is why I'm short the market. Maybe SKF wasn't the best thing I could've bought to accomplish this since it's limited to just the Financial sector, but I guess it's good enough. It's already up to $120 from $106 when I bought 2 days ago.

The U.S. dollar is finally starting to drop, so gold is starting to recover. Currently it is at $820. This means my Sprott funds are finally recovering a bit.

Oil shot up to $49 to day on the US dollar drop and expectation that OPEC will announce a big production cut in their Dec.17th meeting. Also, the International Energy Agency's latest monthly report said that they actually expect global oil demand to rise in 2009 by 500,000 barrels a day, going against the recent U.S. goverment Energy Information Administration's forecast that demand would drop by that same amount in 2009.

SKF

I bought some SKF (2x inverse financials) yesterday at $106.00.

Here's what the 3-month chart looks like:

There's still no good news in sight, so I see no reason for a continued rally in the financials or the rest of the market. (You never know though, because at some point here, probably early next year, people will become optimistic and start investing again. This may happen with Obama coming into power and people just generally thinking we must be near a bottom.)

I still expect more bad news in December and even just looking at the chart from a technical perspective, this trade looks like a good risk/reward trade. I mean, SKF went from $280 to $100 here in less than a month, so I think the odds of a bounce are good. I hope to sell around $140.

Recession Confirmed

Market crash again today. Glad I got out of SSO and UYG! Apparently it was the biggest one-day point drop in the TSX since crash of '87. Like that even means anything any more. I think the media can stop giving stats like "the biggest x day point/percentage drop since xyz." Every day it's some new record; the volatility is just crazy. So just stop it with the stats unless it's something really major.

I was wanting to switch over to SKF (2x short financials, basically the opposite of UYG), but was waiting for it to go below $130. It didn't quite make it, and it shot up 30% today -- gah! Missed out again. There's so much opportunity to play these market swings, it's just impossible to time the peaks and valleys.

Oh, and the big news today was that yes, the U.S. is in a recession and it officially started in December of 2007. Well, no duh. I think it's so stupid that it took a whole year to "confirm" the recession. But I guess everyone's definition of the term recession is different anyway. According to the most commonly used rule of thumb, you have to have 2 consecutive quarters of negative GDP growth to be in a recession, which has not happened yet. Obviously that is not a very reliable indicator. I hated how the question in the news throughout 2008 was always "Do you think we're in a recession?" Why wasn't every single economist jumping up and down saying, "Yep, it sure looks like it!" No, no-one would ever admit it. You can never be negative... wouldn't want to spook investors and have the markets drop or something.

Of course Mr. Eric Sprott was right as usual, saying back in January and February of 2008 that it looked like the recession had finally begun. It's always interesting to go back to Sprott's Markets at a Glance articles from late 2007 and early 2008 to see how accurately they predicted the whole mess that is now happening.

I'm obviously more bearish on the markets than bullish, but I keep feeling I'm missing out on the short opportunities and then I end up going long when I think there might be a temporary bottom. And I could see myself trying to grab a short-term bounce again soon, buying back into UYG if it hits the $3.xx range over the next week. We'll see...