No Shoes, No Shirt, No Problem

As the Fall leaves drop upon State College, so to does interview season. My disappearance last week was due to the latter, as interview prep kept me away from new posts. And if your wondering what the job market is like for an undergraduate in Finance, you might of guessed that it is somewhat challenging. With the financial industry experiencing one of the biggest upheavals in modern times, companies are less the anxious to recruit new hires

Moving on to the good news, the markets were up across the board last week as bargain prices are forcing investors back into this market. As we all come to terms with the fact that things are bad and will be for some time, but that Armageddon has been avoided, the market will hopefully settle down

Volatility continued today, with the markets trading within a 550 point range. And as I avoid stocks due their volatility and thus the unpredictability, my focus has been on currencies. The EUR/USD pair remains easier to trade here, and I initiated a long position on the pair this morning

If you take a look at the graphs below, you can see that after rallying for the last month, the dollar is taking a breathier here, and the Euro looks posed for a rally. Please note that the overall trend of a strong dollar remains firmly intact, but a bounce due to oversold conditions should occur over the next week

Bottom Line: Avoiding stocks and focusing on currencies

Market Numbness

The DOW on Friday had the largest point swing in history, over 1,000 points. But with the index eventually only dropping 128 points, Friday could be considered a success. I remember when a 100 point move used to be significant, but not anymore. Investors have become numb to such drastic movements, or at least I have

I'm starting to think that a capitulation moment is still lurking out there, although the fact that the S&P 500 dropped 15% this week alone, leaves me with some doubts. Reinforcing this capitulation theory is that, as many readers probably already know, market crashes seems to like the month of October, with our nation's two most famous crashes in 1929 and 1987 both occurring in this month. With this being said, the market is so oversold at the moment, that I question if it is realistic for the S&P 500 to fall below 768, which is the low of the last decade

I found a good article in Seeking Alpha about how to handle a snap-back rally if we get one next week. But with the VIX at 69, I'm in no position to predict this market. The only 2 things I know are that stocks are oversold and that predictions in this market are for chumps

Oversold: Did I mention that already?

As the markets plunge for another day, I'm beginning to think this is one of the most orderly market crashes in history. Though I'm not sure which is worse, slowing losing your retirement, or seeing it crushed in just one day

Technicals continued to deteriorate today as the VIX hit yet another all-time high, signaling that the only thing driving the markets right now is good old fashion fear. I wonder what my Professors are thinking about the efficient market hypothesis now

Of note was that Dr. Phil was having a special on the financial crisis today. This had me thinking that Dr. Phil could be a contrarian indicator. If he's talking about how bad things are in the markets, then maybe we're nearing a bottom, as retail investors are the last to get into a bull market, and the last to get out of a bear market

Moving on, Art Cashin must have read my blog yesterday ( let's be serious!) because this morning on CNBC he was talking about how oversold the market was. Commenting that a rally was in our midst, and that "he could almost taste it"

With the markets closing down 700 points and Shadow Trader squawking in my ear that he is speechless, it was quite a day. The play in hindsight was to be short, but I am certainly not smart enough to be shorting these markets with such oversold conditions. I remain firmly on the sidelines, knowing I'm leaving money on the table, but happy to do so in the name of capital preservation

Bottom Line: Where's my bear market rally?

The Financial Crisis

Fear sets in when the Government provides a solution, but the markets continue to sell-off. It is scary out there, $2 trillion of retirement assets are gone, the markets seem to be down hundreds of points each day, and over the last two weeks, stocks have lost over 18%

When you take a look at the S&P 500, it's quite a shock to see it below 1,000. On top of it all, fundamentals and now technicals are out the window. Investors are gripped by fear, mutual fund outflows are at record levels, and Jim Cramer didn't help matters, telling people on NBC to take their money off the table (this after calling a bottom to the market about a month ago)

But many of you know this, the question is what to do now, what am I doing now. Well I'm relatively young, and at age 22 I have the luxury of time. I have not touched my Roth IRA, which is fully invested in stocks, and my trading account is firmly on the sidelines as discussed in previous posts

We are in a bear market (duh), but bear markets have bear market rallies. I plan to stay on the sidelines until one happens. Technicals have been telling us that we should have had one a longtime ago, but we haven't, and that's ok. I expect we will soon have several strong positive days, and when that happens, I plan to get involved in a big way

Bottom Line: Still waiting for the bear market rally, and in awe of consecutive triple digit losses in the indices

Selling an Oversold Market

With markets vastly oversold, as mentioned yesterday, stocks managed to get even more bearish, primarily on news from Europe. As all hope seemed to be lost, and the DOW down over 800 points, word came that the G8 may hold an emergency summit, and we saw the major indices climb back to end the day down about 3%

I remain confident with my thesis that the market is due to rally this week because of oversold conditions, however, as mentioned in my previous post, this market is completely news driven. The negative news from Europe this morning drove the selling all day, along with a healthy dose of fear

Bottom Line: I remain on the sidelines waiting for the rally

**Reliable Investments** (Another SNL Clip)

Oversold Market

It will be a slow economic week, with only Ben Bernanke spicing things up on Tuesday with a speech to the National Association of Business Economics. It also should be noted that the trade deficit number will be released on Friday as well

Stocks are clearly oversold here, indicating that a rally this week is likely. We cannot take anything for granted however, as this market continues to be news driven, rather than by technicals or fundamentals

With the S&P 500 hitting the bottom of its regression channel, the T2108 indicator at 6.10%, and the S&P at the 1100 level, the bulls should be favored this week

Turning to Forex quickly, the fact that the EUR/USD pair continues to make new lows has me favoring only short positions. I will continue to look for some resistance though, as in the long-run the EURO should find some strength as the US Government seems intent on printing currency

Bottom Line: Look for a bear market rally this week as all signs point to an oversold market

**Video of Washington Approving the Bailout Package...SNL Style**

Wall Street's Shadow Market

Tonight on 60 Minutes, Steve Kroft is going to dive into some of the financial instruments that Wall Street used to package subprime debt...just an FYI

Saturday Links

With the markets on the fritz, the Treasury printing money like it's going out of style, and Sarah Palin thinking she's qualified to be VP, it's been quite a week. Here are some links to help clarify the week that was, and the week that will be...

• Volatility: A historical perspective: A nice post about what this recent volatility means for you
• Trading Goddess on the Currency Markets: Thoughts on the EUR/USD pairs
• When Inflation Get Crazy: A brief look at Zimbabwe's problems via Running of the Bulls
• Pork in the Bailout Bill: It's good to see that even in a national crisis Congress can come together and stuff pork in the bailout bill
• See a Pattern: Some market psychology
• Centsports.com: A fun way to bet on sports for free (really, it's free!)