Jan ’09 Preview and Prelim Outlook for 2009

It’s a brand new year with brand new opportunities (and brand new risks!) awaiting the unsuspecting trader who dares to venture into the Den! He/She who dares, WINS! If you are too daring, be prepared for the risks.

If you though that 2008 was a rough year, watch out … 2009 is going to get tougher! Expect more gyrations that could send the markets much lower than where it is now.

(Click to enlarge)

Remember that I expect DOW to range along till May …

Originally Posted by Conrad’s Blog
So in summary, DOW for 6,000 on the low between now and May 2009 and daylight will not get much brighter than 9,500.

… although the DOW broke above the 50DSMA for the second time in two weeks, personally, I am not so hopeful – I suspect more downside before we get any upside. And we will test the Nov ’08 lows of 7,500 before we can have any hope of it not getting down to 6,000.

The VIX has come down considerably after a gorgeous Double Top in Q4 2008.

VIX Double Top  VIX 2 yr

Although it is sitting perfectly at 40 points, it is also settled nicely on my 2 year uptrending channel which is now acting as support. I am led to believe that there is going to be another run up in volatility very soon if VIX doesn’t break down into my channel.

And it makes sense that volatility will spike again if you consider that in less than two weeks from today, Earnings Season for January (Q1 2009) kicks off with Alcoa (AA) after the close on Monday, January 12. I am expecting, obviously, more crappy earnings and few surprises. Traditionally, Jan earnings have always been a good season but I suspect that disappointment will reign and guidance will suck. If anything, it will be the guidance that sends the market down and volatility up. (Remember that next week Fri 9 Jan is Non-Farm Payrolls Day!)

This may not be a bad thing for me as my option positions could use a timely boost in IV before the Jan Expiration. For those curious about where I think a “reasonable” VIX should be, well, I’ll settle for a low VIX if it ranges around 35 points.

What will I be looking for this year in terms of moving sectors?

Looks like I’ll be back to scalping again while I rest up on my swings. The last month has been a real bore for me as ranges dipped and volatility dropped – a day trader’s slumber. I can’t wait for earnings season to start so that I can get back to being my old self and not worry which way the market will swing.

Investors looking for an opportunity to get into something lucrative should wait till the end of January for the Jan Effect when I will post the best possibilities for gain for the year 2009.

Till then, trade/invest wisely, always play it safe and convergent, and be exceptionally careful in 2009 … there’s going to be a lot of Bull-shit and Bear Claws that are going to get you the moment you blink.

Cheers, Happy New Year and Happy Hunting in 2009!


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