What The Market Giveth, The Market Taketh Away

by Larry Levin


What a surprising reversal we had today. The bulls quickly sold out of yesterday's gains because they know the old trader adage: What the market giveth, the market taketh away! It was so bearish that today was the worst day for the banking sector since July 2002.

Although the downturn in the global economy is now at least 9-months old, measured from the S&P high of last October, the press is only today saying the bear market is official. From last October it has spread like the flooding in Iowa and Southern Wisconsin , flooding one area after another, always a step ahead of volunteers filling sand bags.

The housing and mortgage crisis is far from over. The oil price crisis started in August 2007, when the oil price was only $70 per barrel, half what it now is. The prices of other commodities, particularly corn soybeans and wheat, have moved with the price of oil. Equity markets behaved as though they were immune from the building recession as they always do. But that charade lasted until last October when the S&P 500 peaked. Since that time the stock market has fallen by 20%, which means the bear market has just started.

Everyone would like to know how long and how deep the 2007 recession is going to be. I don't know, but I know who pretends to have the answer: commentators and analysts. There are always commentators and analysts who think that the end of a recession is about six months away. In 2007 there were many so-called experts who expected a recovery in the second half of 2008; that expectation has now shifted back into 2009. They now believe the recovery will start in the second half of next year and persist through 2010. Will they be right this time? Who cares - follow the trend.

Recessions can be short, medium or long, and they can be mild, medium or severe. It is already clear that this is not going to be a short and mild recession like that of 2001. But we don't know whether it will be medium or long and severe. Of course, it will not take the same form in different countries and different equity sectors. Like the flooding I witnessed first hand, some areas will be spared, while others will be under 8-feet of water.

The global economy is in a bear market that is still only one year old. So there is only one thing you can do: Trade well and follow the trend, not the so-called experts.

Real Time Trading Signals*for

Trade Date: 7/9/08

E-Mini S&P Trades*
(before fees and commissions):

1) B/away buy @ 8:30am at 1277.50 = +1.00 (1 lot)

2) IDVA sell @ 9:50am at 1275.50 = b/e & -.50

3) PP buy @ 10:25am at 1275.50 = -.75 & b/e

4) Algorithm trades (3)...combined total...-3.50


E-Mini Russell Trades*
(before fees and commissions):

1) Sell @ 8:58am at 679.0 = +.5 (1 lot)

2) Buy @ 9:35am at 680.4 = -.6 (1 lot)

3) Sell @ 11:20am at 681.1 = +1.1 (1 lot) +$100


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