Back In the Market

Last Tuesday (7/22) I re-entered the Market for the first time since my last post describing the direction I thought the Markets were headed. I am still Bearish in the near term and I believed that the short covering rally we saw in Financial Stocks due to SEC Chairman Christopher Cox's testimony that new short selling techniques would be implemented in 4 business days. This Statement led to an artificial market rally because the targeted 'naked" short sellers were forced to close out their positions in a timely fashion. The S&P Financial Index gained nearly 15% in 3 trading days and large banks like Wachovia, WM, Citi, BAC, Fannie and Freddie saw their stocks rise well over 50%.

What was inherent in this rally was that it was largly artificial in nature, that the short sellers would regain the positions held prior to the announcement of the SEC, and that these new rules that were put in place in no way help these troubled balance sheets or add value to the percieved worth of these banks.

I initiated a position in the DOG at 67.17 on Tuesday (7/22) at 12:43pm as the DJIA traded at 11,492. The DOG invests 80% of assets in financial instruments with economic charachteristics that should be inverse to those of the index.

Here is a look at the chart of my trade since inception, comparing the rally of the DOG (blue) to the fall of the DOW (red). The percentages nearly identical.

"DOG vs DOW"