The stock market is likely to get a temporary lift from the bailout. However, with earnings season on the way, expect some dismal forward guidance. Remember that stock prices reflect perceptions about future earnings. The S&P is only 20% off its highs, and many consumer related sectors are well above their lows for this year. Also, short selling restrictions only work for so long, and eventually the market reflects actual value.
I have been telling friends and family to make sure assets are protected and hedged against inflation. I am gradually accumulating gold (via GLD and DGP) and Swiss francs (via FXF). As we enter what promises to be an eventful week, I will be lightly invested and watching the post-bailout action, with an eye toward shorting strength in damaged sectors.
Airlines look like they are ready to give up much of their big move since July. There is no question businesses and individuals will be tightening their belts. Of course, a breakdown in oil prices could delay the drop.
- UAUA topped out around 14.00 and is resting on the last line of support, with empty space below. I will be looking to enter a short position below Friday's low.
- AMR has a double top in place. I have a small short position, and will be looking to add on a break of the 200 day moving average.
- SKYW broke a rising trendline with volume and is sitting at its 50 day moving average.
The consumer will struggle with lower employment, a falling dollar, and rising inflation.
- FINL hit a low of 1.48 in January, and is now up to 9.51. The chart is starting to show distribution, and has a large potential fall ahead.
