Dry Tinder Rally - 1/9/2008

I am pulling out the Bear Market Playbook. The patterns going into 2008 are starting to diverge from 2007. The patterns are beginning to look like 2001-2002 type patterns.

Case in point. I bought near the close in the S&P yesterday at 1399. The market subsequently headed lower to 1393. Nevertheless, the pattern last year was to hold it into the close. I felt comfortable with this long because RSI was down to 0.2 - totally ridiculous.

I also shorted ten year futures on the back of the same RSI type trade.

Although the market rallied up to 1406, I was greedy and did not sell it out there. I wish I had because intra-day the market made new lows twice. In 2007, this would not have happened.

But I noticed that the new lows felt lethargic down at 1385, and there was a big spike that drove us up to 1400 again. I thought there was a potential for a DRY TINDER BOTTOM, so I bought back in at 1403 looking for a charge at the highs. This proved to be a very good call. Sold it out at 1413. Market had the classical rush to take out highs.

BOTTOM-LINE: Bear Market patterns are back in play. We need to study the 2000-2002 patterns.

SENTIMENT: S3, we are stuck in Depression.