On Tuesday, investors were struggling to determine if the market’s next big move would be higher after stocks bounced to the upside after taking a nose dive earlier in the week.
Should you position as if the worst of the sell-off over? Does the 635 point drop in the Dow on Monday signal capitulation ?
Strategic investor Dennis Gartman thinks at least for the short term – the path of least resistance is higher. “The panic is done for now,” he says. “The bottom is in for a while.”
In fact Gartman has already established long positions in the SPY. And if the S&P holds he suggests looking at steel, railroads and banks.
However he concedes, the market could very well go back and test the Monday lows “just to see how good they are. Don’t get too married to a long position. I don't know if the ultimate bottom is in, but for a while the 'V' bottom is in."
Trader Brian Kelly agrees. He tells us that he’s covered his short position in SPY, and sold out of gold. “I think we could have a serious rally. I wouldn’t be surprised to see stocks rally 7-8%,” he says. However, he suggests playing it with upside calls to limit risk.
Trader Pete Najarian is also establishing new longs. He thinks the market has settled enough to look at BofA and Blackstone simply because he thinks they were beaten up badly. “But only put a toe in the water, don’t dive in head first,” he says.
