Friday, August 08, 2008

Well the week played out as expected....

After the 300+ point fed rally, I said to expect a reactionary sell-off which was fueled by more weakness in financials (they'll bounce from here). Oil continues to weaken despite the news out of Russia that they are at war with the Georgians. Oil's around $117 as I write this and it if it breaks $115 I think the next stop is $105. The dollar continues to gain ground as well.

So, the market is range bound right now but the sell oil, buy stocks (particularly defensive tech) trade seems intact for next week. This is a risky pair trade b/c the economy is really struggling and I find it hard to be long anything right now, but with properly set downside limits I think you can feel comfortable being long QQQQ and long DUG next week.*

* Disclosure - I have a long position in DUG.

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