The SPX declined 2.49 points yesterday to close at 1295.86. TOT daily traders came into the session 300% short and have held the position overnight and into today.
The bond model remains neutral, and the gold model remains bearish.
The super long term perspective for the stock market remains bearish.
The long-term model (a six month perspective) remains neutral, and the short term model (a one month perspective) remains bearish.
The market staged a late afternoon rally as word of California Governor Gray Davis’ State of the State message leaked out. In his speech, Davis said he rejected “the irresponsible notion that we can afford to allow our major utilities to go bankrupt.” As a result of the leak, in the last half hour of trading, shares of PG&E rose 1 3/8 to 14 and Southern California Edison rose 1 11/16 to 12. The rest of the market followed.
As a general rule, I don’t comment on news, but since this was a news driven rally, Wall Street’s response to Davis’ comments, now that they’re public, may be germane. Late last night, Standard & Poor’s said:
“The governor’s speech “is somewhat disappointing” in terms of giving assurance to investors. “They need to see something stronger from the (California Public Utilities Commission) and the governor before they open the faucet,” S&P said. Having the state set aside a billion dollars won’t make much of a dent when the state’s two largest utilities absorb that much in unreimbursed power costs each month, S&P said. “That does little to solve the problem.” “Time is short, the (two) utilities only have several weeks of working capital remaining. It’s very important that a solution be fashioned sooner rather than later.”
Since the daily model is neutral at the onset today, reflecting a balance between bullish and bearish forces, news and the response thereto will have a greater impact than usual. TOT daily traders come into today’s session 300% short. Take your profit on the opening. We’ll watch this from the sidelines for awhile. However, if the SPX rallies about 15 points, then the risk/opportunity ratio will be more favorable to shorting again. Therefore, reestablish the 300% short position at SPX 1310.50. Alternatively, if the rally stalls and the SPX declines to 1289, reestablish the short position there. If you go short, use an 8 point protective buy stop, as risk is high. If short on the close, carry your position overnight and into tomorrow.
Since initiation of this service on September 30, 1993, our daily trader recommendations have gained 6348.21 cumulative SPX points, compared to a gain of 836.93 points in the index itself over the same period.
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