Obama market continues...how to invest?

As of today the market has lost 22% since Obama won the election. Can we attribute this decline to Obama? Not completely. There are several factors that must be taken into account.

1) We are in a bear market (this is the prevalent direction)
2) There has been a disruption in natural market activity via the bailout.
3) Least important, some economic news is worse than expected.

However, under normal circumstances there are these considerations

1) We are in the seasonally best time to be in the market (November to January)
2) We only had one appreciable bear market rally (week before election)
3) Commodities have been falling at a tremendous rate (oil especially) and this alleviates inflation.

The fact that this market has been unable to mount any kind of serious move despite the substantial drop in commodities and considering that government intervention has been largely priced in, there remains only one major wild card.

President-elect Obama.

As discussed in a previous article, the week immediately after the election was the worst in history and the trend continues. Every time Obama opens his mouth and bashes "thriving Wall St" or chooses another Clintonista appointee, the market shudders. Investors can forgive candidates for saying outrageous crap during the campaign, but when the rhetoric continues after the election - investors will not be so forgiving.

So in conclusion, we can certainly blame Obama for this decline, acknowledging of course that he is no 100% responsible.

So where do we stand?

The market is now facing critical support at Dow 6,900-7,000. This represents long-term bottoms form the '03 bear market and the '98 Asian currency crisis. These levels will hold with a roughly 85% likelihood. If they hold, expect a massive bear market rally that can propel this market a good 30-40% in the upcoming months. But rest assured, that this will not be a V bottom and these lows will be revisited. So from a strategy standpoint, establishing intermediate longs in virtually any sector (except energy) is a good bet.

IF, IF this support fails and Dow 7000 is breached - look out below. We can discuss it if it happens.

Let me know if you have any questions about the market!

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