The upward bounce continues and investors are starting to hope that the worst is over. I am having trouble believing that everyone could have gotten off so lightly. Sure, the credit markets took it on the chin, and some hedge funds blew up. But given the scale of the sub-prime problem, the amount of leverage in the system, the level of take-no-prisoners risk-taking, it seems naieve to think that the whole problem would be solved by some minor Fed easing and limited asset transfers. The equity markets were down about 10% from their peaks -- hardly a crisis!
The TSX is still below its target "up-bounce" range (TSX currently at about 13,400, target range 13,550 - 13,900). So it would not be unreasonable to expect some more upside. But it is times like these a trader needs to stay vigilant and ready to change his mind if he is proved wrong. If the TSX moves above 13,900 I will be forced to reduce my short position.
MARKET POSITION: SHORT (4 units)
Thursday, August 23, 2007
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