Wednesday, October 15, 2008

Back to the low point

The stock market has returned to the bear market lows of last Thursday's and Friday's closing prices. Either this concludes a very quick sucker rally on the way to new lows, or the market is testing these levels again before a more significant bear market rally gets going.

Did I mention I'm staying in cash?

13 comments:

wooderson316 said...

I'd be surprised to see a true, prolonged sucker-rally based on margin calls coming out, hedges buying their shorts to pay shorts, and the out-and-out final realization that yes, Sweet Fanny, we are in a dark recession.

Zach said...

Hi Jody, interesting blog. Just read the last several updates and you lend some perspective or critique that I find interesting. What I can’t find is anything that suggests you have a better handle on the market than anyone else, meaning if you are examining proprietary analysis and timing methods, you have missed a majority of the decline and are considering a remarkable 11K dow but remain in cash. But more alarming is your sale of SDS above 1200 while targeting 940? What could your analysis have been suggesting there that makes your timing method superior to Brinker or fund “experts?” This is the tell of any subscription service. There are several “phantoms” or “fantasies” of how the market works and I have to wonder if your analysis that the SPX would find support at 940 is any different. Certainly a remarkable opportunity we are presented with.

Zach

adventurerneil said...

No guts no glory! Where's your grizzly bear? :)

Just kidding, mostly - discretion is certainly the better part of valor in this volatility.

If S&P touches 800, I will probably establish some long positions on companies I really trust, with solid balance sheets and such.

Jody said...

Zach,

(1) If you don't think I have a "better handle" on the market than anyone else, then no one is forcing you to visit or read this blog :)

(2) Regarding Brinker, the Motley Fools, and missing the decline over the past year: Brinker and the Fools have been 100% invested in stocks for the entire bear market, while I've been in cash or bear funds since January. If my early sale of SDS for a small profit was "alarming", then what would you call the decisions of others to buy or hold stocks for a loss in the same period? I will let my readers decide who, exactly, "missed" the decline.

(3) If you've really read previous posts as you claim to have, then you would know that my call of a bottom at S&P 940 and Dow 8500 was experimental, and that I was surprised as anyone that it seems to have panned out so far. Sure, I've bragged about the success of that long-term prediction as I admitted I would earlier - who wouldn't? But I wasn't going to risk my retirement account on an experiment - that would be foolish.

I'd call it a success if I stayed in 100% cash for most of the bear market. A couple of profitable dips into bear funds is just icing on the cake.

I'm not sure exactly what your beef is, but feel free to follow this blog and judge for yourself or not.

Tim said...

Jody

Through all the static I believe that Zach was asking whether your market timing is measured in periods of weeks, months or years. That is in what time period are you most comfortable in predicting declines, upswings or sideways action? I would be also interested if your methods help you pick sectors to buy or sell?

Jody said...

Tim,

As it states at the top of the blog, I'm not a day trader. Any position I take in the market usually lasts at least a month or so.

I have dabbled in sectors before, but only when there are obvious trend differences. Right now all sectors are declining together more or less, so I'm not inclined to pick one out of the lineup.

shockcase said...

Hey Jody,

Nice to see your views of the market using your trend indicators.

Quick one on Eillot's Wave: Do you think this is the 3rd Leg of Wave C on the Bear-Market trend?

Alan

Jody said...

Alan,

The Elliot Wave principle is related to Fibonacci grids, which I've already commented on. Suffice it to say that these "methods" just don't work when it comes to predicting future price trends.

RPorterLville said...

Hi Jody

Love your stuff. I have been a equities bear for several years. I have been trading on my own now since 1998 and seem to trade opposite the crowd. Are you familar with Terry Laundry and his T Theory Observations. Just wondering because I enjoy reading both of your blogs.

I was wondering if you have any thoughts on the U.S. Dollar and Bonds. The FED continues printing money and Colonel Klink (Paulson)is telling the banks to deploy the capital the Govt. has given them. I kind of think that easy money got in this trouble. I have observed that bonds have been relatively weak as of late even with equities tanking.

JA

Dan said...

Jody,
I saw this morning that Warren Buffet is buying US stocks now at these levels. He says they will be alot higher a year from now. Do you believe we've hit THE bottom and that its time to re-enter the market. What are your thoughts about his comments and his buying in at these levels?

Jody said...

JA,

At the very least, I agree that the market's P/E ratio (the REAL P/E ratio) will at some point return to the vicinity of 10 or lower, just because things that have happened before will probably happen again.

Regarding bonds and the dollar, I don't pay as much attention to them as I do stocks. In general I tend to prefer "hands off" economic policies, and I know from history that printing money has led to disastrous inflation in some cases, but that's about all I can add to the discussion.

Dan,

I do not think the market has hit THE bottom.

Warren Buffet is a long-term buy-and-hold investor who is better than most at identifying companies with superior future profit potential, so he has different goals and different criteria for judging prices and "good times to buy." By buying some stocks now instead of last October, Buffet has already won by saving himself 40% - that's true even if the market declines another 20% from here.

wooderson316 said...

Is it worthwhile to perform a TA on the recent markets, or has their volatility made TA a pointless exercise?

Culver said...

Hi Jody,
What are your thoughts on entering the short side?
Low volume rally yesterday, double top today, there's been some decent resistance ~9250. I'm thinking now's a good time.
Cheers,
Aaron