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.
Gamecock.. Just my thoughts
October 23rd, 2008 at 03:14 pm
October 23rd, 2008 at 04:54 pm 1224780880
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?
October 23rd, 2008 at 05:00 pm 1224781216
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.
October 23rd, 2008 at 05:20 pm 1224782418
I agree that we'll probably go sideways until the flag fully forms. But any dat over 8500 is a good day.
October 23rd, 2008 at 05:47 pm 1224784039
October 23rd, 2008 at 05:52 pm 1224784323
October 23rd, 2008 at 05:57 pm 1224784631
October 23rd, 2008 at 05:58 pm 1224784731
October 23rd, 2008 at 06:18 pm 1224785928
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?
October 23rd, 2008 at 06:23 pm 1224786229
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.
October 24th, 2008 at 03:25 am 1224818706
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)