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September 01, 2020 10:18am
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Testy Tuesday Morning

So far so bad! Sadly, we called the action pretty much on the nose yesterday.  In the morning post I said that we would: " see where the bottom is today - hopefully we find it early on " and my 9:36 Alert to members I noted: " it will be impressive if this morning dip is all we get. "  I set our watch level at 8,130 and the Dow was rejected just under there twice and by 12:12, with the Dow at 8,106, I called the top and sent out an alert saying : " All the advance/decline numbers are very red, this is a highly selective rally and we just tested the top again and failed - I have to think it’s worth chancing going short here . "  While we were expecting a follow-through to 7,900 today (same action as last Monday/Tuesday) we were concerned by the afternoon stick save attempt and did go into the close just 55% bearish (1/2 covered on our DIA puts) as we had already caught a 100-point drop perfectly and we didn’t want to be too greedy.  This morning the futures are indicating that bearish greed may have been a good idea as  the futures (7am) are pointing down another 1.5% on news that C and BAC may need to raise more capital along with the continuing flu scare.  I emphasize scare at this point because, in a typical year, over 60,000 Americans die from " pneumonia/influenza " and, while we don’t want to make light of a virulent new strain, it’s a bit out of proportion to begin panicking when 150 people die of one particular strain. Unfortunately, there’s a very fine and quickly crossed line between an outbreak and a catastrophe and the government is right to overreact but the markets are not.  Being a forward-looking mechanism doesn’t mean seeing doom around every corner but that’s the kind of nonsense the media likes to stir up and it was amazing to see the Transports take such a huge hit - down 5% on the day with airlines down 10-20% - as the media begins recounting the damage done to the travel industry in the 2003 SARS outbreak.  On the whole, this was the last thing we needed with the markets already weak but, as I said yesterday, there is great opportunity growing in this sector.  We picked up a hedged entry on UAUA yesterday and CAL will be our next target as they retest $11 (hopefully $10).  Since we can sell June…
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