"Turning Bullish?"

by Larry Levin

Although the market was down today, it was no surprise to us. Why? Because yesterday I listed 10 reasons why the news was actually bad and the market took it to heart. Some of my friends from the pit must have printed out, and then spread my email across the floor. Today, however, I have a different list: bullish reasons why the market could trend up.

1. The algorithms we use to spot short term trends while day trading are now suggesting a long term shift may have occurred. However, we MUST keep a keen eye on the credit-crisis that doesn't want to go away.

2. The October 10th low may have been the "capitulation" low many have been waiting for since 2,901 of the 3,130 stocks that trade on the NYSE, a shocking 93%, made new yearly lows. Since then, however, the new lows did not bring out similar types of selling barrages.

3. The S&P500 made a new low below the 2002 low but the Dow did not, which is a huge non-confirmation of a continuation lower.

4. I don't know of any time in history where the market has been down by 50% where we have not seen a rally, even if it is later called a suckers rally. Remember, if I am correct and then the S&P reverses lower again, we will follow the trend right back down again.

5. All of Wall Street is expecting a Santa Claus rally, whether one calls it window dressing or not.

6. Amazingly, yields on the 3-month Treasury bill went negative for the first time in history. At a NEGATIVE yield, it's probably safe to say that Treasuries are overbought and stocks by comparison are cheap.

7. See #1 above.

Sure, I know there are many reasons to disagree with the points above. I'm simply saying there are compelling reasons why the market could stage a nice little rally over the next several months. That being said, I'd like to see it fall to 850.00-ish (possibly to 820.00) for a perfect entry. If there is a rally, I can see it rallying to 1000.00; however, if there is a real pop, a multi-month rally could lead to a 1200.00 S&P.

Previous Day's Trading Room Results:

Trade Date: 12/9/08

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

Not available

ZB (30 Year Bond) Trades*
(before fees and commissions):


1) No trades today.



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