I Found Rock Bottom

I guess I'm off by a few days and few points...

Too Far Too Fast, Its That Simple

“Valuations look attractive. It's time for a rebound, the stock market has just fallen too rapidly. IBM's numbers show that it's not all doom and gloom out there.” -Espen Furnes, Storebrand Asset Management

Yesterday I said, That’s the Bottom, For Now. On Tuesday I said, Oversold Bounce Time, Going Long. I am now long across the board.

Too far too fast. Its that simple. Equities will have an elastic bounce before heading back into the abyss.

Global Stocks, U.S. Futures Advance; IBM, Dexia, ICBC Rally: “Stocks rebounded in Europe and Asia and U.S. index futures rose after International Business Machines Corp. reaffirmed its profit forecast and investors speculated the worst five-day rout since 1987 was overdone.

IBM, the world's biggest computer-services company, jumped 6.3 percent in Germany after earnings topped analysts' estimates. Cap Gemini SA rallied 7.4 percent in Paris. BHP Billiton Ltd. led mining shares higher, jumping 10 percent as metals gained in London. Dexia SA surged 24 percent after Belgium, France and Luxembourg agreed to provide guarantees on borrowings of the world's largest lender to local governments.

The MSCI World Index added 0.6 percent to 1,009.35 at 11:34 a.m. in London. The index lost 15 percent in the previous five days, the biggest drop since October 1987. The sell-off left shares in the index at their cheapest relative to earnings in more than a decade.”

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That's the Bottom, For Now

On Tuesday I said it was Oversold Bounce Time, Going Long: “So, I started going net long yesterday. That’s right LONG.

You can find my conversation here on the Slope of Hope and here on the Evil Speculator in the comments section.

I’ve gone long the NASDAQ and the S&P500 through QLD and SSO. I’ve picked up some of names the hedgies have puked hard: AGU, MON, MOS, POT and AAPL, BIDU, GOOG, RIMM.

These are all oversold bounce trades. If the wheels start to come off, I’ll hedge by slamming the Nasdaq and S&P 500 futures short.”

I picked up most of the positions near the Monday lows. I hedged those gains, although not perfectly, using futures on the gap up off the open Tuesday. Clearly the wheels starting coming off pretty quickly and I was glad for the hedges. I took them off a little early and flipped long on the S&P500 (ES DEC08).

I think this was the rinse. Everybody that had to get out, got out. The hedgies got their redemption notices and were forced sellers. Retail accounts got margin calls and were forced sellers. The weak hands have folded.

I’ve noticed Joe Sixpack has finally caught on after being smacked with headline after headline warning of a ‘financial crisis’ and ‘another great depression’. I’m pretty sure most of them have now sold their mutual funds now. Hell, even Jim Cramer capitulated hitting the “SELLSELLSELL” button. Jim Cramer Says Sell, Almost Guarantees a Bottom.

GLOBAL Rate Cut

There we go… GLOBALLY coordinated rate cuts.

I think that was the last bullet.

I don’t think the central banks of the world have any ammo left.

Fed, ECB, Central Banks Lower Rates in Coordinated Reduction: “The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an unprecedented, emergency coordinated bid to ease the economic effects of the financial crisis.

The Fed cut its benchmark rate by a half point to 1.5 percent, the central bank in a statement. The ECB and central banks of the U.K., Canada, Sweden and Switzerland are also reducing rates, the Fed said in a statement.

“The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,” according to a joint statement by the central banks. “Some easing of global monetary conditions is therefore warranted.””