It's Always Darkest Before The Dawn

My contrarian heart strings have begun pulling me back into this market. There is a complete absence of any news remotely positive. At this rate, the Dow will be at zero come Obama's inauguration! Looks like Bush will have one last laugh. Much like a spoiled older sibling having to turn over the stolen toy, they break it at the last moment, "Here, have fun playing with that!".

All joking aside, If anything Obama would like to see as much speculation and pessimism wrung out of the market before he gets a chance to drive it. I believe that is why his initial press conference after the election was so anticlimactic and void of any real news. Many market pundits were expecting him to reveal his Treasury Secretary or at the very least give a glimpse into his approach of this crisis. By moving the starting line of his administration further into the future the market uncertainty gives the crisis another chance at exhausting itself before he gets the reigns.

In the short term I believe there are two possible scenarios:

1) Bottoming around 770 to 795 (795 was hit on the S&P futures overnight) or

2) Moving much much lower, possibly below 700 in a final capitulation crash.

If I was to handicap things (that's all a good trader is), I would put the chances of a sub 700 S&P in the near term much less than a healthy bounce from here.

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9:47 follow up

So this is what the edge of western civilization looks like? Scary stuff. Would you like a value meal, or one share of Citigroup (5.45!). Line in the sand for today is 7750 on the Dow. Let's pray it holds.

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1:04 follow up

So far so good, but three hours is an eternity in this market. 7750 held for now. All it will take for things to stabilize is one gram of good news. The automobile industry loan may just be that catalyst. I like what I am seeing with the gold/silver ratio, it looks like it's about to rollover. This market needs the return of risk like a heroin addict needs methadone. 2:30 press conference with Senators may be the moment of truth. Let's hope they don't grandstand like they did with the bailout. I'm not holding my breath.