We Are Due For A Bear-Market Rally

Now that I have taken a bit of a hiatus, I expect to be posting more often. During the past few weeks, I’ve been traveling quite a bit, and moreover, I was feeling a bit burned out. I just arrived back in Brazil, and sitting here on my laptop looking at the ocean, I’m feeling refreshed and ready.

Looking at the market, we remain in a steep downtrend. There is nothing bullish about this chart:

Lately I have heard a lot of commentary that the recent market action essentially reflects a vote of no confidence in the Obama agenda. While I have mixed feelings about the administration’s actions so far, I think the market is merely reflecting the reality that the world financial system is in deep trouble. The market would be headed in this direction regardless of the government’s approach, since the fundamentals of the market are far beyond the capacity of any government to fix in a short time span.

Jon Stewart rips CNBC:

At this point, charts are so extended to the downside, I am having a difficult time finding anything to short. Given the fundamentals of the economy, and the lack of technical support, who knows how far this drop can go. At the same time, we are due for a bear-market rally. I did add some smaller long positions today, all commodity-related.

- United States Oil ETF (USO): Oil had a big day on Wednesday, and managed to hold onto most of its gains despite the general carnage today. I like the volume pattern.

- Suncor Energy (SU) is showing signs of accumulation, and could charge out of this long base.

- Newfield Exploration (NFX) is similar to SU. Both have held their ground during the past few weeks. The breakout point for this stock is clear.

- Denbury Resources (DNR) has an interesting volume pattern, and a clear stop if it breaks below its ascending trendline.

- FreePort McMoRan (FCX) had huge volume on Wednesday, and looks prepared to break above resistance should the broader market rally.

Once again, each of these positions is rather small. For now, the trend is down. At the same time, we could easily see an explosive move higher, perhaps in reaction to tomorrow’s jobs number. Watch the volume.

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