Dead Cats will Bounce.

Hey everyone,

8 days ago -or 6 trading days ago - I said the best trading strategy was to, "Sell the days that go up. Don't buy the days that go down"

Hopefully, you listened to me, because despite today's rally, the Dow is still down 1000 points from close on Friday, October 3rd to close yesterday, October 13th.

Now, the real question is what do we do from here. Buy, Sell or Hold?

The answer is all three.

If you were long in the financials (why you would do that to yourself, I have no idea) - take today's rally as a gift and sell. They may go up again with the government's big announcement today, but let's face it - good news in the financials is that a given company won't go under. Is this really where you think you you'll make any money in the next few months?

The above is also true for insurers. Insurers are screwed.

If you have a position in technology - stay there. Yesterday's rally really helped tech because they got disproportionetly hammered over the last several down days. If we see the stock market drop a little tommorrow, there are a few tech stocks that ICM is eyeing to pick up, but we won't pick them up unless they hit certain valuations. I think over the next few days you'll see some recovery in tech...but if the markets go down, that recovery will only be that tech doesn't go down as much as the rest of the market.

So what to buy? Aspirin.

But seriously, as far as I'm concerned, as of market close there is nothing that is screaming "BUY ME!!!". At 40/share, I think COF is a buy, not a screaming buy. They report earnings this thursday, and I expect the stock to be above 40 by the end of the week, but I'm not a 100% that it will be above 50 by the end of the week. I'd dump it at 50 (or even at 45) for the short term play. However, long term - by which I mean in 2 years or less, its going to be at 60 AT LEAST.

SHLD is a buy too, and considering it declined today because of the resignation of the CFO, it is very close to a screaming buy. However, I wouldn't say its a screaming buy until it is below 60. Buying it at 67 is still the right decision, but it's not fool proof. Also, anyone that thinks that the CEO and chairman Eddie Lampert isn't the de-facto CFO is a moron. Who cares about the damn CFO when Lampert is running the company?

Also, I'm in the middle of earnings season right now, so I expect that I'll have my usual earnings season predictions up tommorrow or the day after.


-Mansij Hans, E.I.T.
Member, Intigril Capital Management


P.S. I'm just getting in details on the 250 billion capital injection that was being whispered around Wall Street and it looks like the federal goverment is forcing banks to give the government big equity stakes in exchange for cash. This is heavily dilutive and and I imagine that the banks are going to see their share prices cut. The only problem with this drop prediction is that with the extent of negativity in the market, you may still see prices go up short term for some of the banks because the risk of bankruptcy may been priced in.