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2009: The Year of the Trader


Ability to make tactical moves of utmost importance.

Goodbye and good riddance, 2008. A quick look back at Opportunities Abound in 2008 -- an article published on Minyanville last January -- reveals that I and my firm nailed some great opportunities to not only outperform the market, but to actually make money in 2008.

Now let's look ahead and see what we can do to preserve capital in 2009.

After such a large selloff in the S&P 500 in 2008, I like to use Fibonacci Retracement lines to determine potential target areas for a countertrend retracement rally.

As you can see in the chart below, the main Fibonacci retracement levels (0.382, 0.500, and 0.618) happen to coincide with the 1050, 1150, and 1250 levels, respectively. At a minimum, I would expect us to rally into the 1050 level to start off the new year - which would be a nice percentage rally from current levels. This is assuming that the November lows (around 750) hold in the S&P 500, which I think they will in the near term.

However, we're going to have to be very careful, and I think 2009 will be very tricky. It will be a trader's market, and the ability to make tactical moves will be of the utmost importance. If we do rally, watch the S&P 500 when it reaches these retracement levels to determine the market reaction at these countertrend resistance points.

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One of my main themes for 2009 is going to be a bid to things that people need. With that theme in mind, I am going to offer the PHO (PowerShares Water Resource Portfolio) as my equity pick for 2009.

While I still think equities in general will remain a challenged asset class, I think the PHO is a great vehicle with a solid long-term macro theme, and I believe it will continue to outperform in 2009 as it did in 2008.

I would look to buy the PHO below $15; I believe it will easily see 20+% upside, to $18, in the first half of 2009.

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In keeping with the Things People Need theme, I think agricultural commodities will be great markets to trade in 2009.

Corn happens to be one of my favorite longer term charts, and I would use any pullbacks towards the 350 level to get long corn.

As you can see in the chart below, Corn has bounced nicely off the 200-week moving average just above the 350 level, which also coincides with the previous lows in 2007 and previous highs in 2004. I think corn will easily get back to 500. The world population is growing fast, and that means more mouths to feed!

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No positions in stocks mentioned.
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