DG on Hold

by Ian L. Cooper

We want to continue holding our Dollar General (DG:NYSE) play. The company recently reported that total retail sales for the September five-week period came in at US$567.6 million, a 14% gain over the US$497 million posted one year earlier. Not bad. Same-store sales for the five-week period were up 5%, as compared to the 9% increase posted one year earlier.

For the period ended October 4, total retail sales increased 14.8% to US$1,022.3 million from US$890.4 million in the same period a year ago. Same-store sales for the period increased 5.6%. As for the future, DG expects for total sales to rise another 11% to 14%, and for same-store sales to increase 3% to 5%. October sales results will be released on November 7.

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We banked 1,312% in three months–and we are about to do it again.

Since June 14, I’ve been buying puts like they’re Supreme Court Justices during election season. I’ve hit eight puts in a row. If you had started with US$10,000 just three months ago, you could have US$141,160 in your trading account today. (OK, one of the trades was a long call on a gold index.)

A funny thing happened on the way to the market. Everybody I know started to go short. "Selling the bounces" is now the dominant paradigm of the sheep.

Beware the sudden bull

I’ve been doing some research and I’ve discovered some interesting facts about the post-1929 bear market. Check out these massive bear market rallies:

48% from November 13, 1929, to April 17, 1930

94% from July 8, 1932, to September 7, 1932

121% from February 27, 1933, to February 5, 1934

127% from July 26, 1934, to March 10, 1937

60% from March 31, 1938, to November 12 of that year

28% from April 8, 1939, to September 12 of that year

As I write this, we are 912 days into the current bear market. I believe that one of these sustained bear market rallies is looming. We are due for that 121% 1933-1944 rally… or something like it.

The volatility index (VIX) just hit 49.99 and the smart money boys in the futures pits are covering their shorts and going long. The sheep are bleating, and the wolves are stirring in the darkness. Be a wolf. Join the Red Zone VIP, click here.