I figure it like this, I remember around DOW 13k-14k nothing could go wrong, stocks were running up day after day, new record highs week after week, eventually everyone and anyone thought it was going to last and that buying any pullback was guaranteed profits. Well how quick that changed about a year ago this time, the talking heads were saying there was enough cash on the sidelines that any minor dips would be bought even though at the time the economy started to weaken. Fast forward to today, the opposite is now happening, there are no buyers and most talking heads are actually completely negative on the market, the psychology of this market place completely baffles me, it seems when everyone is leaning in one direction the only thing to do is lean the total opposite direction which I think may be the case today. There are so many indicators to show that just maybe a near term bottom is taking place however me being one of the biggest bears on this forum its hard to believe such a statement. Aside from me being so bearish its hard for me to say that a bottom is nearing when in fact a little thought in my head says that maybe we correct another 25-40% from these levels, I do not have the answers, no one does, but I can say that with so much negative sentiment in this market right now I would lean in the direction others are NOT leaning in, and that means to start a little buying down here, I believe this bear market is going to offer extreme rallies to the point where you will think that the recession has passed and the time to buy is now however it wont be so I would be buying these massive dips and selling the up days. Think in the opposite direction the others are thinking in.....buy when they are selling and sell when they are buying.
I have traded for 18 years, almost 11 years for a living. Most old timers like Arthur Cashin are looking for classic capitulation. Personally, I think we are seeing capitulation. It is the dribble capitulation not seen so often, of hedge funds looking to redeem by the first of the year. That along with the redemption of mutual funds by main street. Capitulation deals with one fear followed by another fear. The first fear is by those with weak hands who throw in the towel. The other fear is by those with CASH who fear missing a bottom, an opportunity that only comes around may be every five or ten years. In classic capitulation, the first fear accelerates DOWNSIDE volume, and then the second fear accelerates upside volume. I would argue that the second fear of missing a bottom will not easily come. If for no other reason, the election LOOMS big time. There are more reasons than the election that money will stay on the sideline which deal with fundamental economics. Bernanke was asked an EXCELLENT question today about a financial downturn with an economy which is service based to the tune of 80 per cent. I am not sure he answered it well or not. But that is really the question here, the state of the economy, an economy which is 80 per cent service based. In that regard, we are in uncharted territory here.
There will certainly be bear rallies and opportunities to trade the long side. I have been taking opportunities on both the long and short side with my trading $$$ since spring 07 when I shifted my investment portfolio from long to short. I am still short overall but have also made money taking long positions and selling into rallies and buying dips. That is for trading. For investing the long side. be smart be patient and wait for the dust to settle. From reading this forums It appears few have a clue about how actual value investing ala buffet/graham/lynch works and the core strategy of value investing. It is defensive not aggressive. TRUE/SMART value investing doesn't attempt to pick bottoms. You sacrifice small profit for safety. You buy on the way up, not down. Stock is at $30...goes down to $12.....you buy at $18 after the dust has settled and there is light at the end of the tunnel/fundamental turn around. In basic value investing( a fundamental turn around play) when you see the fundamentals improving(light at the end of the tunnel) then you co0nsider buying. Bad idea trying to guess the market won't fall further.... We can tumble a lot more from here.... My strategy is to Trade this market....but I will be patient and wait to go long with my investment portfolio for the long side. Happy Trades!
Arthur Cashin continues to say we need a really negative opened followed by a huge upside with massive volume to mark a bottom. In my opinion he has said this so many times that it just seems to obvious.
well i just got off the phone with my girlfriend's bestfriend's boyfriend who was talking to me for about 30 minutes trying to figure out if we were on the verge of collapse as a society... not sure what that tells you guys but just passing it along
I agree. personally I wonder if we will get capitulation any time soon. generally the markets require a trigger for that to happen. If we do I doubt it is anything other than a short term bear rally. I think we continue to grind away day after day for a few qtrs . The bear has to maul a lot more victims before we get that final BIG BIG drop and bottom....the economy is going to stink for coming qtrs and earnings are going to suck for multiple qtrs(who knows how long)
I love Arthur Cashin. Yesterday, he quite wisely said that the rally off the lows had no power, and with that he meant accelerating volume. My point in my original post was, that huge upside volume comes from FEAR as well, a fear of missing a bottom that only comes around every five or ten years. In my view, the money that would be scared of missing a bottom and creating the huge upside, at this point is passive and complacent. The 800 point down side move yesterday did NOT move them to fear of missing a bottom. Another reason I did not mention in my original post for the passiveness and complacency of money on the sidelines is, that most of the upside moves in the last few monthes have been artificially created by Gubmint. Everyone knows and expects further Gubmint tinkering with a rate cut, when the Gubmint is through TINKERING around with the markets, and the Gubmint is out of bullets, then REAL downside fear may appear, and a capitulation triggered by Fear may move those on the sideline to enter the market. So far the good intentions of the Gubmint has precluded a real market bottom.
Everyone keeps calling for capitulation. there are three percent of all stocks above there 20 day moving average! Ive been a super bear and I dont see how you can find value selling or shorting right now. that should have been 20 percent ago