G-7 to the Rescue

The market's action this week was stunning. We saw a year or two's worth of moves in a matter of hours both Monday and today (Friday). It is far too volatile to try and pick entry/exit points.

Having said that, if the G-7 manages to agree on a plan this weekend, we may see a pop rally and if things stabilize over a course of weeks as the TARP gets rolled out, perhaps even a 2,000 - 3,000 point up move on the Dow into early next year (best case), which would represent about a 50% retracement of the loss from the all-time high a year ago. But I don't think such a rally will hold for long and these lows (7,888 Dow) will be retested, and, in our opinion, breached downward to lower lows from a short-term peak sometime after the new year (after the inauguration).

It is virtually impossible to trade/time this market with this kind of volatility, unless you are will to strap on a catheter and remain seated at a computer screen. Even a bathroom break can be devastatingly expensive in such an environment. We could get 2,000-3,000+ points of upside but it could be coyote-ugly getting there with many days like today and Monday with 500-1,000 point intraday moves.

We now are convinced this holiday season will be miserable for retailers if September same store comparable store sales were down 7-14% already. But there will be another $150 billion tax rebate stimulus, which will be passed in Congress and rushed into IRS production in mid-November to get money out to people before Christmas. Perhaps that will help, assuming the Chinese will lend us the money.

It's now midway through the 4th inning.