Bailout Passed In House, What’s Next?

Markets on Thursday may react positively initially. I’ve actually bought back some of the positions that I sold at a slightly lower prices. But I’m simply trading these stocks.

Earning seasons however are just around the corner. As soon as this boost is over, I expect that markets may test the recent low, and it’d better hold at a higher level. If that is how things go, then we may have an intermediate rally. In the meantime, I think precious metals sector may take a back seat, and trade in a range.

Energy sectors however are looking VERY BAD currently as I’ve said previously. I’ve pretty much sold out all of my energy holdings, except the ones that are held under my money management account (which is actually significant). I don’t want to second guess what my money manager does. But I’m not going along with his bets temporarily.

In summary, the big picture should be
1. General stock markets will work their way up slowly.
2. PM sector probably trading in a big range to continue to finish Elliot wave 2 and tire all participants.
3. Energy sector is undergoing a fall of Elliot wave 2, and this is usually the worst down wave in a bull market. I don’t know how long it will last, but frankly, these stocks are dirt cheap. I may still pick up some value plays.

PM sector should lead energy sector. Therefore, it fell first, and it will rise first also. Eventually, money from the reflation policies from all the government bailouts will find their way into actual commodity prices. Before that happens, PM will be the most sensitive, and will react first. When the reflation becomes inflation again, energy sectors will be alive again.

Looking forward in 2009, I believe both energy and PM will come back in a big way next year. Be ready to switch over.

For now, long term commodity investors can continue to hold. The only thing that I hate to hold is stocks in general stock market.

Sorry that I haven’t been blogging on a more regular basis. I’m a little worn out between markets and my day job.