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Two Ways To Play: Stocks Ignore Confidence Plunge


Strengthen your portfolio in good times and bad.

Bloomberg reports consumer confidence in the U.S. plunged to the lowest level on record in October, a month were equity markets crashed and bank-lending halted worldwide.

The Conference Board's confidence index fell to 38, far below the 52 reading economists were expecting. The 23.4 point drop this month was the third-largest recorded, behind two plunges in the 1970's both linked to oil shocks.

Separately, the S&P/Case-Shiller index showed home prices in 20 U.S. metropolitan locations fell 16.6% in August from the same month in 1007. It was the fastest pace since the records were kept in 2001.

The markets ignored this data, however. The S&P surged by 91 points, or 10.8% to 940, and the Dow Jones Industrial Average closed up by 890 points, or 10.8% to 9065. It was the second-largest point gain ever for the DJIA.

For another perspective, see Professor Jeff Macke's A Great Buying Opportunity?

From the Bull Pen: Bulls should be cautious adding new positions after such a large move. Nonetheless, returning with the crude bounce theme, one can look to Exxon-Mobil (XOM) for a trade. Behavior at the $75 level is important.

From the Bear Cave: Professor Depew reminds us that this vicious rally should be taken in the context of a bear market. "Think about how you felt last Thursday. Or last Monday and Tuesday for that matter." It's a sentiment that Professor Jeff Macke also echoes. Those bearish can use the Ultrashort S&P 500 (SDS). One option can be to fade (read: buy) into $86 with a sell stop below that level.
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Position in SDS

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