Changing Tone

The tone is changing in the market so I no longer would want to be short. My stop was hit on DXD (down 7%). It served its purpose as insurance to protect against any major downside but with the rally over the past few days the tone feels so much more positive. I would also be nervous shorting the DOW with so many financials in it. A lot of people took gains out of the commodities and are now holding cash on the sidelines. I wouldn't be surprised if that excess cash started finding its way into the beaten up financials. BSC's bid being raised, the Fed's various programs to help with liquidity and the lowered Fed Funds rate all seem to be providing catalysts to this market. There are still liquidity issues (See CIT) but the many think that the market is extremely oversold so any news that isn't as bad as expected is a big positive for the market.

Dow Up 417pts!

This is a gift. You can now buy DXD (Insurance) at $2 lower!

All the Fed did today was keep the 20 largest banks in business. It will help but providing liquidity to these guys doesn't mean they are going to pass it along to anyone else. We are in a recession. The economy is not growing. Jobs are not being created. Shorts covered today so that just means they don't want to be short not that people are willing to buy. In fact, all we need is one negative headline and down 200pts we go.

I am a buyer of DXD here and have an order in after hours.

BUY INSURANCE

Think the market is going down? You have 2 choices

1) Sell your stocks and go into cash which pays you 2-3% (and going down with each rate cut)

2) Buy insurance and keep the dividends on your stocks rolling in

I recommend high safe dividend paying stocks (VZ, GE, MO, MCD) that pay higher dividends then cash (money markets & high yield savings) and then buying ETFs that go up when the market goes down. This way you get your dividends and you protect you overall portfolio value.

See below:

DOG - is an ETF that goes up 1 for 1 as the Dow Jones Industrial Average (DJIA) goes down.

DXD - is an ETF that goes up 2 for 1 as the DJIA goes down.

I like DXD since you can buy it cheaper and get twice the protection. Keep in mind that if the market goes up then you lose twice as much though.

DOG

DXD