Come Monday

“The longer we dwell on our misfortunes the greater is their power to harm us.” – Voltaire

We may see a sell off on Monday morning, maybe not, the bulls and bears all have opinions on this one. I am not surprised by the downgrade at all and you shouldn’t be either. Moody’s and S&P both told the guys in charge what they needed to do to avoid it, they didn’t acquiesce, so hence the downgrade. And yes, I hate S&P too, they are ivory tower bean counters that never had fun at a party and they are off my Christmas card list after yesterday. I do think it took stones to do what they did though. They are the main game in town like it or not, and even though you may disagree with their call you have to respect the power of that call and what ripples it may cause.

The question now is how does the market react to Friday evenings downgrade? A downgrade makes for great fodder for the media and bloggers, but in the big picture we are still the only game in town unless you want some Euro paper or perhaps some paper from  Swaziland. I mean really, come on, where you gonna go?  The world is falling apart and the major institutions cant just buy gold, so our paper still plays big. You may even see yield go even lower Monday or Tuesday.

Friday’s headline will create some issues for sure, but this was no surprise.  If we have a massive sell off on Monday (which I hope is the case), I will leverage my kids and get long for the rally. I will trade that rally and then look for shorts (which shouldn’t be chased here). Why? Because market bottoms rarely end with days like Thursday, and I don’t think we have seen true capitulation in the market yet. A massive flush needs to occur in my opinion for me to make  long bets again for any duration more than a day or two. The trend is broken and charts have been decimated. We are back to “trading the tape” again and if you are a novice or a beginner, it’s probably a good time to take that vacation you have been thinking about.

Europe is still on the front page and they are meeting again this weekend, but we all know that they go from one mini disaster to the next. The rhetoric I hear from Italy (they were getting all the hate last week) is the same noise I heard from Ireland and Greece several months back and we know how that ended, so I believe nothing from that side of the pond. That scenario is just one long unending slow motion train wreck that won’t be resolved for years.

It will be interesting to see what kind of whispers come out of the Fed next week, so pay attention to that too. Some want Geithner’s head on a stick, so that will also be interesting theater next week. The Sunday morning political shows should be great entertainment as the charlatans from both sides will point fingers and play the blame game. I won’t watch, I’ve had enough of them. We are on our own and they will not save us.

Much is oversold and little if anything is overbought. I have started the search for plays long and short and look forward to the week ahead.

There will be epic opportunities to make money in this market long and short in the weeks and months ahead. Have a plan. If you were knocked around like a rag doll last week shake it off and stay positive, you will get many chances going forward.

Good Luck.

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