Bailout, Goodbye Bear, What's Next?

The Fed came to the rescue and the center held, so far anyway. Previously the S&P was locked into the 1270 - 1400 range that became 1275 - 1325 but has now been broken. After settling at about 1260 prices have rallies towards 1270. This is no surprise as support often becomes resistance and prices often tend to go back to "test" that level. So we can expect some efforts to "regain" 1270. I believe they will fail but we must remain open minded and listen to the market.

Part of me thinks the market should have crashed today to the tune of 10 - 25%. After all, what did the Fed do other than shift the risk to themselves from Wall Street? And, now they have painted an ENORMOUS target on their backs by saying they will treat brokerage firms like banks and backstop them, too. The benefits are obvious in that it buys time and soothes some exposed nerves and one day all this paper should be ok. But the risks are equally obvious, too. Net net, the market is lower but "controlled". Perhaps it shows some strength that we are not crashing but that isn't making me want to reduce shorts and/or add longs.

As long as the market stays below the 1270 - 1275 range we are still very vulnerable to lower prices. Should that change then we must adapt. Until then we move nervously ahead.

For many its been a bad time, fortunately Geller Capital's approach has prevented a disaster for our clients. In some cases we are even positive on the year. Stay tuned, it can and will be both interesting and challenging.