About Oct 9th friends at work asked me, “My stocks are down 45% since the top of the market, should I sell those or keep holding them?”

I told them, “There’s a fool’s rally coming. Just wait for the top of that rally to sell. I’ll send you an email on that.”

Then on Oct 10th I bought stocks 2X leveraged long at the bottom (S&P500 = 845), and I wrote my co-workers that I smelled the base of rally forming. I bought some calls also on the S&P500.

Then the markets climbed 20% in two days. I wrote co-workers an email on the 14th, within 30 minutes of the top, telling them “Sell your longs. I think this is the top of the rally.” I sold all my longs that day within five minutes of the top at S&P500 = 1040. I netted fifty grand that week, including netting 45% net on call options I bought at the base of that rally.

However, something bothered me. I felt the markets were NOT satisfied with that lame 3-day 20% fool’s rally. Also most of my co-workers missed selling because the top of that rally came and went so fast.

About Oct. 24th markets were back down and oil was getting hammered. I told you and my co-workers to buy oil stocks. Those oil stocks are now up 20% to 25%. I also warned multiple times on gold, that it could trade flat to down during the recession (deflationary pressures). However, I did buy gold at $710.

Two weeks ago, after markets fell back off that first lame fool’s rally, I stated there HAS to be another more substantial rally before the end of the year, a rally that will benefit as more signs come in showing unfreezing of credit markets.

We are now well into that second, more substantial, Fool’s Rally. You should also recall I predicted this rally will have far more staying power, lasting far longer than the first lame 3-day fool’s rally AND I predicted this Fool’s Rally will take the S&P500 above 1,100, possibly above 1,200. Those levels will them offer you a GREAT opportunity to short the indexes and ride the S&P500 down as it craters at about ~600 sometime next year.

So sit up and take notice; watch for your entry point to go short the indexes. The S&P500 is already at 1,000. Credit markets are unfreezing. Libor rates have contracted.

RECOMMENDATION: wait for 1095 on the S&P500, and then start building short positions on the indexes. If the S&P500 continues up to 1200, then just double-down your short positions.

I even dumped half my gold today (taking a 2% net loss) in order to free up more cash for shorting indexes (and because it is bad practice to hold gold against the tide of a stock market rally)

I’m continuing to hold my oil stocks, trying to squeeze another 5% or 10% out of this rally.

Did I make any mistakes during the last two weeks? Yes! I bought Chinese stocks when the Shanghai exchange was at 1850. Then it fell to about 1650.