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Hitting the 2009 Home Stretch


Which investments worked, which didn't, and what to expect.

Back at the end of June, I said that the S&P 500 should, at a minimum, rally into the 1000 level, and with the amount of liquidity the government has been printing, I wouldn't be surprised to see it rally through the 1100 level.

We are smack in the middle of those two levels as I write this, and looking back at our Fibonacci retracement levels for the S&P 500, it's clear our next big level of resistance comes in around 1120, which is the 50% retracement level.

I continue to think this is a bear market rally and the 1100 level and above should offer a nice exit point for those looking to sell equities.

Of course, the market could keep grinding higher, but I think the risk/reward scenario is now back to favoring the downside in equities at these levels.

If the S&P 500 is able to get through the 50% retracement at 1120, the 61.8% retrace and 200-week moving average would start to come into play above 1200. I have a hard time seeing stocks get there, but who knows!

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Now let's run through my calls for the past quarter and see how we can position for the fourth quarter of 2010. Time flies when you're having fun!

The PowerShares Water Resources (PHO) has been one of my favorite vehicles for long equity exposure here, and I continue to like the solid long-term macro theme.

I recommended adding to the PHO at the end of the first quarter around $12 with a target in the high teens.

Obviously we're getting up to my target in price so I'd be looking to lock in profits soon. I would raise your stop on any PHO longs to $16 and look to use rallies into the high teens to lock in profits.

If you notice the S&P 500 starting to roll over at the resistance levels discussed above, lock in profits quickly!

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The agricultural commodities have seen some great trading opportunities as well this year.

First let's look at corn. We basically got stopped out of our corn long at $350, which was pretty much flat from where we entered the market in the first quarter.

Corn is back on a buy signal here in my work and I'd be a buyer of corn again below $350.

I still think corn could trade up to $500, and using a $300 stop level gives us a nice three-to-one risk/reward setup here. The low $300s have been good support for corn prices for the past couple of years.

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Positions in SPY puts, corn futures, TBT, gold futures, GLD, UNG calls
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