Look Out Below

All I’ve heard today are commentators asking where is the next technical level.  Is it Dow 5000, S&P at 600?  Where is it?  When you have a really bad market, sometimes you can throw the technicals out the window.  Many times the stock market bottoms where nobody thinks it will.  That appears to be where we’re headed.  When you change your charts to weekly and then monthly and you still can’t find support areas, it’s pretty scary.  Until investors stop looking for a place to buy, the market won’t bottom.  We’ll get tradable rallies, but nothing for real until everyone gives up.  Their not there yet though just measured by my crazy investor indicator which is not near a place where meaningful rallies have started.

Where’d the rally go I thought was coming?  I thought we’d have a rally by now given various indiciators I watch.  In fact, I believe if it wasn’t for the anti-business and anti-capitalism policies coming out of Washington last week, we’d already be rallying.  But, we’re not.  We’re falling even more even though we’re oversold.  That’s another symptom of a bear market.  You’re oversold and it just keeps going lower.  It’s the opposite of 1999 when everything went up and just wouldn’t come down.  Overbought stayed overbought. 

I covered my shorts early last week as you know and even though that’s early, I’m still not losing any sleep.  The reason is because I have so much cash and so many bonds.  But, even with all that cash, I’m still selling some of the remaining stocks today.  This will reduce my beta even more (correlation to the market).  One thing we know is everyday we get more selling, we’re getting closer to a rally.  Keep your powder dry and don’t be a hero.  If you’re in cash, you want the capitulation.  That means fear will spike, volume spikes, and we go down hard for several days in a row.  When we get that, we’ll have a longer lasting rally.   That’s when all this cash can be used.


2 Responses to “Look Out Below”

  1. 1 Sugar Land Donnie March 2, 2009 at 4:18 pm

    I’m busting a gut here – GE headed to $5.00 a share???
    Am I crazy, or are we getting close to dropping a dime on some of these out here??? GE, DD, MMM – help me out here, Karl – I’m drooling at the next 20 years values(where I’ll probably be drooling anyway) But – if they are any kind of staying power, we could be rich in our old ages – IF WE PLAY IT RIGHT!!! Am I right?

  2. 2 lev March 3, 2009 at 1:28 am

    From a bloomberg.com story:

    “Contracts to protect against a drop in the S&P 500 for two years cost $15,160 on the Chicago Board Options Exchange at the end of last week, compared with $6,875 in 2007, according to price-adjusted data compiled by Bloomberg. That shows traders expect the benchmark gauge for U.S. equities to fluctuate twice as much in the next two years as it has since 2000. ”

    Is the Crazy Investor Index showing an extreme?

    Does it matter?

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