Sir, thanks for your comments. Again, I agree overall with your
thesis that money was not easily made on those rising MACd crossovers–certainly
not easy to the way it was made in 2003-2006–LOL!
But I do believe
the nimble traders were able to make some dough going long on good,
selective stocks during those crossovers. For instance, ISRG was still
running upward even early in 2008…as were oil
plays like USO, RIG, SWN…and materials plays like SMN, PBR, etc.
here’s an interesting little anecdote that might prove hopeful for the
bulls….according to this week’s Barron’s, the S&P has been down
25% or more below its 50 dma line only 5 times since the year 1928.
This is the 6th time right now.
In each of the previous 5
incidents, the S&P recovered at least 14% from its lows each
time…some recoveries were stronger than 14% ( of course, a lot of
these recoveries were probably short squeezes, but a deeply depressed
market is fertile ground for a short squeeze, once the catalyst is
found). Let’s just say the Dow reaches 7882, the Oct. 10 intra-day low,
then begins rebound. Using the minimum 14% rebound stat, we could see
the Dow rally back about 1100 pts to around 8900–and that’s at
minimum…9000 or higher could be possible too!
A few of you might recall I put up the BPNYA (measures the percentage of
bullish stock charts on the NYSE stocks) monthly chart going back 21
years including the ’87 crash– about a week ago, and I showed how that
index was at its all time farthest downward draft from its 20-period
line–in fact, the index was down over 90% from the 20-period line
…and I further demonstrated how each time it hit a deep low, the
index would rally back, on average about 40 points and usually back
toward at least the 20-period line.
point here is that from a charting perspective using daily, weekly or
monthly charts (yes, I know, these charts haven’t worked lately…only
the one-minute charts seem to work-lol!!!) one should notice how far
the index line has fallen on the major indices from their 20-period and
50-period lines. We are at historic spreads from the moving averages,
and whenever this happens, there is a sharp snap-back that usually
follows which catches a lot of bears off guard.
I’m not saying
we’re about to get the mother of all rallies this week, but I am saying
to keep an eye out and be prepared to shut down shorts or if you are
one sitting purely in cash, don’t let these bargains get away without a
little speculation–dip your feet in as the markets are selling on
Monday morning…I did that on Oct. 10 panic sell day…while others
were throwing the baby out with the bath water, I actually made only
buys that day!–that’s the way Buffett does it, people. He buys when
others are running…and you can do this too, if you are heavily in
cash and have sat out a lot of the downdraft of the past few
weeks…one stock I caught on Oct. 10 was CHK and I sold it two days
later for a 50% gain!–once the powerful snapback occurred.
you are taking my suggestion and buying stocks on Monday as markets
melt and 7800 gets tested (either Monday or Tuesday), you should NOT
buy a lot, but get your feet wet–buy 1/3 the amount you would usually
buy in a better market…as my old money manager friend says, it’s okay to nibble, but in small
quantities…this is what I have been doing for a few weeks here,
mostly to my regret thus far…
But I am not risking the farm
either, but glad to pick up great companies and diversifying with MSFT,
DISney, XTO, WMT, Citi-preferred, and so on….I know that if I hold
these great companies, they will come back eventually and reward
me…at the same time, I am getting paid some very sweet dividends by
these great companies while I wait for happy days to come again. Don’t
buy a lot of stocks now if you need the money in 3 years or less…but
me, I am not yet near retirement, and I don’t plan to need the money for at least
another 10 years or more…so I speculate some.
I also have been mostly
in cash these past few months while I watched the markets sink deeper
and deeper, so now as these bargains appear, I am in good position to
buy them outright…no margin needed to own great companies at
ridiculous low PEs and low book value ratios…this is what stock
buying was meant to be! Buy low….so I can someday sell high…maybe
very high! (smile)
BUT, if you sit on sidelines in 100% cash, I
think many of you will miss the sweetest part of the rally, which
usually occurs early when we are at such deep lows as we are now.
my perception is that we will be testing the Oct. 10 low on Monday, and
no later than Tuesday…my read of the charts tells me we will hold
7600 or better on the Dow…whether it is because of the Plunge Protection Team does not
matter, but what matters is the public’s perception….and if a rally
should begin this week, I think the first 10% gain will happen so fast,
that if people aren’t right at their keyboards and pressing buy, buy,
buy lickety-split, they will have missed the easiest and sweetest part
of the run-up.
Does this mean a new bull market begins this
week, if I am right? NO. What it means is we have a powerful bear
market rally due soon, and money will be made by betting long once it
gets underway…it could last several days…perhaps weeks…but the
sweetest easiest part of the money will be made in the first few
Of course, we probably will start the week off
sinking like a lead weight–I’m in agreement with most of you bears on
the start….but keep a close eye…I still say it’s 50/50 we hold 7600
or better, and then we rally–perhaps a very strong rally that takes us
quickly back to 8800 or better by end of the week.