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Gamecock.. Just my thoughts

October 23rd, 2008 at 08:14 am

Personally, I think we have hit the bottom. And the technical analysis I have done seems to support it. Does this mean the technicals will start breaking down in the future? No. It means I have some expectations of what is occurring and so far the market is behaving the way I thought.

There is a concept in investing called capitulation. This is when everyone throws in the towel and gives up. In September, there was tremendous fear in the street. The pros were bailing out and moving to cash. Hedge funds were going under because they couldn't get there inventory out of Lehman. You might of heard something about prime brokers or other risks with Lehman. This is what they are talking about.

If you believe in Elliot Wave theory and how it pertains to the market, the last wave is when retail gives up. The Q3 statements hit people's mailboxes about 10/10. So I believe that we are seeing the last of the liquidations from the retail.

Now, I mentioned 8,451 on the dow. This was the low close. Sure the lowest point was 7,773 but in technical analysis it is the close that is important. Right now, I have support at 8,451. If you look at the chart, we keep bouncing off of 8,500. This is good, because to me it seems that the market has hit a bottom.



Now if you look at the VIX, it starting to top out. In other words, the markets are not getting more volatile, just the same highly volatile level.



With these signals, I have starting buying into the market. Did I lose a ton of money this year? You betcha.

The last is a little qualitative analysis. When Paulson handed all the money to the banks, he basically signaled that the banking infrastructure will not fail. This has in my opinion started to loosen up the credit markets. Right now, all I hear about is lower profits and recession. This is a far cry away from a global problem with the banking infrastructure.

But as I have said before, you this as an opportunity to assess your risk tolerance. Do not let fear drive you to a decision. What ever you decide is your investment philosophy, that philosophy should be followed in good times and bad.

As of this posting, the market is up 200 points.

10 Responses to “Gamecock.. Just my thoughts”

  1. Broken Arrow Says:

    Thanks for sharing your thoughts on this!

    Yes, I've noticed that too, and knew what you meant by flagging. I just wasn't sure if what I am looking at really is flagging, signaling a bottom.

    But I have mentioned in the forums anyways that the short-term market is certainly moving sideways. I think that much we can agree on and be sure of right now.

    As such, I am making a trade that I think is appropriate given the circumstances.

    Either way, I agree that no one should be afraid of the market. So long a proper asset allocation is set, being afraid of it could end up doing more harm than good to one's money. Investor risk, nor market risk, is the greatest portfolio risk of all.

    Besides, I thought she was busy with getting married?

  2. gamecock43 Says:

    Hahaha...everybody thinks this wedding is taking up my life! I am in the eye of the storm...6 days till I leave and all big things are done and all little things cannot be done until a day or two before we leave.
    So I have been taking my mind off wedding stuff by thinking of the stock market. I guess I thought about it so hard I got myself a bit panicked.
    Well, now is learning time. I am going to re-read this post and try to follow the graphs so I can learn something.

  3. merch Says:

    It could also be the left shoulder of an upside down head and sholder formation. In any case, iam starting to put my feet in.

    I agree that we'll probably go sideways until the flag fully forms. But any dat over 8500 is a good day.

  4. gamecock43 Says:

    Wait...I'm looking at your second graph Merch...and since Sept 08 there has been a pretty steady CLIMB in the stocks! Is this true?? Is the market getting better?? good grief! Everyday the news is flipping out over being way down and in reality the way down is better than 2 months ago! Am I reading this right?

  5. gamecock43 Says:

    Wait...and now I am looking at your tiny graph depicting the heartline of the market each year...and it seems like 05 and 06 were depressed years. Am I reading this right?? Well I remember 05 and 06 and they were not so bad for me. I didn't even know there was trouble going on! Well I remember the housing bubble bursting- but that's it. Well I can handle 05 and 06 type of stuff. That's not bad. Maybe this is not so bad.

  6. merch Says:

    VIX isn't a stock. It's a measure for volatility. It basically says the market has become more voaltile

  7. gamecock43 Says:

    ohh...my bad. Ok, so this is a heartline of volitity. gotcha.

  8. Broken Arrow Says:

    Head and shoulders.... I guess so. But for that to happen, there has to be some kind of panic sell right? And we haven't seen that have we? At least not at the level that we had earlier. Or is it the capitulation we are seeing?

    This is just my personal opinion and I could always be wrong, but something about the chart and the news we're hearing just doesn't jive. Could the government intervention influence the market so much that it could cause the catalyst for a rebound, despite the fact that economic indicators are currently pointing towards a recession? I realize economic indicators trail a bit, but still... does that mean we are finally turning around?

  9. merch Says:

    Market turns around before economy does.

    But yea the big question I have is flag or head and shoulders.

    i think it is the bottom or close to (maybe another 1000 pt drop?) because it's just retail investors getting out now.

    I think you can tell by the drop in volume on the indices.

  10. baselle Says:

    It was 01, 02, and 03 that were bad years for stocks. I had first started with my 403B, and at the time I wished I was in bonds. I was putting money in, and still showing a loss.

    During 05 and 06 I wished I had bought in 01-03 with both hands, instead of just one.

    Treasure these feelings that you have now ... and a few years from now, if you bought with both hands, you'll remember this time fondly. (and hope for them again)

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