Take A Step Back From The Stock Market

The markets today (Thursday) look as if they would rebound off the lows and bounce from the 2002 lows. That is until government officials began to speak and the Dow (^DJI) went from unchanged to down 444 points when the closing bell rang. The close was the lowest since 2002 for the Dow. The S&P (^GSPC) also got crushed, falling 54 points or 6.7% to close at the lowest level since 1997. The NASDAQ (^IXIC) dropped 70 points or 5.1%. Oil is below $50/barrel and gold was the one bright spot - up about $10/ounce.

Not much good I can say about today’s action on the market. When the S&P 500 breaks through support and the Dow and NASDAQ are sitting on theirs, technically today was not a good day. The one glimmer of good news is that the Dow and NASDAQ are above their support levels and the volume was very low. But the fact remains that the market sells off in the last hour each day as the daytraders hammer the shorts as the buyers remain on strike. To turn this market around it is not a stimulus plan or bailout, but rather a glimmer of confidence from investors that gets that first person to step back in to buy stocks. Once this begins it will attract more and more and eventually the masses will rush to buy, just as they did to sell the last few months.

The news has not been good and frankly who truly believes any of the economic numbers to be strong right now. So when a weak number is announced it is surprising to see the selling, but then again there is nobody buying after dismal economic numbers. This goes back again to the fact the news is not good and the confidence level is zero at best. BUT, when times feel as if they just cant get any worse, we are often setting up for a big short squeeze. I do predict we will see a major rally (maybe only a day or two) in the coming days and will use this as an opportunity to initiate more hedges.

TAKE A STEP BACK, PLEASE!

I was asked this evening on Fox what advice I had for investors and my first response was, Stop Panicking! I know, I know. It is like saying do not eat fatty foods or workout every day. It is much easier said than done. Especially when there are fast food joints on every corner and the media keeps dropping the “D” word on you (depression).

Yes things are bad, but things will get better. Within chaos, opportunity arises. Ask any wealthy individual how they made their money and it was most likely being a vulture when the prey was left there for dead. That is how I feel about stocks right now. Most investor have left the stock market for dead and the vultures that sweep down will eventually reap in the rewards in the years to come. The question I always get has to do with should I buy now or sell everything. I would suggest do neither at this point. But I would continue to look for bargains in this market and be ready to pounce once a bottom is found. This does now mean you wait for the media to scream BUY! When that occurs it is already way too late. Then again you do not want to be the hero and time the bottom wrong and not live to hear about the ensuing rally.

I found it interesting today when I was at Fox talking to some of the anchors of the shows. Three very respectable Fox Business anchors and I were discussing the state of the market in the green room (no it is not really green) and for the first time I saw disbelief on their faces. Most of them are not in the market besides some retirement money due to the restrictions, but even they were beginning to question the selling. Typically as an anchor with no “money in the game” it is easy to go on the air when things are good or bad, but today was different. I noticed they were really starting to think about what was going on with stocks and as course our conversation turned to Citigroup (C) at $4 and the automaker bailout. The concensus I felt on the way home when I thought about the conversation was that the three anchors were both throwing in the towel, but at the same time realizing if you have at least 3 years for your portfolio, there is amazing opportunities in the carnage. I just wanted to share that because I was interesting to me to see the drastic attitude changes. Take it for what it is worth.

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