Chart posted below. S2007S, 4-6 weeks after the May top we were already down 10%! You have to know the trend now, and now it is down as long as the top doesn't break and new lows continue to break. The trend can change at anytime and usually most folks will be unaware of it.
The good news is lots o cash on the sidelines and we will rally hard out of this. But, how do we get to the point that new money comes in to play? If you are a money manager lagging in returns, you've missed the current move up-- how much of a pullback do you need to see to act? Well it won't be one day's worth! And without natural buyers tomorrows action could be a nosedive. Well the gut feeling here is we won't even see an attempted rally tomorrow- straight down. Mostly because there is now too much complacency in the pullback! Not one talking head on tv said anything scary, so we will need to be scared by Mr. market. I Still maintain the NASDAQ damage is limited to the 6% range- not much in the scheme of things -- but we need to get there quite fast to scare people.
If the market is going down " lots of cash on the sidelines" if the market is going up " lots of cash waiting to get in"
that`s the game....spin baby spin.....the major brokers`s sell programs tell you the truth....as they are the market.....they decide whether it is good news or bad news......and their computers connected directly to the major exchanges.....do their work! wallsteet is crooked.....that is the first thing you need to know about the markts......three old jewish guys that hung around my father`s brokerage house ingrained that truth in his head...and he passed it along to me!
Cash is always on the sidelines until it comes into the field of play. The best way to gauge what's out there firepower- wise is to keep an eye on money market mutual funds where all that cash gets swept up automatically in accounts. An index has been made which compares that to the capitalization of the wilshire 5000, the broadest index of US stocks. Currently money-fund assets are at $2.2 trillion (this is the only time I get to work in trillions I LOVE IT! It just rolls off the tongue) The Wilshire is valued at $13.3 trillion so the cash figure is 16.8% - that's high. Compare that to any mutual fund that might be down closer to 5% and then think just how much bigger this " Super Fund" would be. It's a pretty impressive number and it falls within what Ned davis calls the " HIGH LIQUIDITY ZONE " Since 1980 the market has rallied 60% of the time when the ratio is over 12.8%-- the average gain being 13.2%. As always the art is in the timing.....