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Are You Scared Yet?
Research for Online Investors
by John Dalt
9/01/09
We enter the month
of September like a bride. We are excited and all dressed for the
occasion, but have a knot in our stomach because of the unknown
nature of our future.
Yesterday’s volume
was so light; you could imagine investors acting like old men
in a small town. They brought their chairs out of the pool
hall, and lined up sitting on the sidewalk, leaned back in
their chairs, ready to watch the wreck everyone expected to
occur in the problem
intersection.
It didn’t really
happen, oh the market sold off a
little.
Do you remember the
800-point swings last winter? No, in the world of investing,
yesterday was not even a fender
bender.
So where do we go from
here?
The market opened
up this morning, the buy the dips crowd acting like a group of
gangly teenage boys at a middle school dance, anxious to dance
with the girls, or scoop up the
bargains.
It lasted a little over an
hour before the market was back in negative
territory. Just like the proverbial middle school
boy, the buyers sat down wallowing in their remorse for
trying and
failing.
Financials were
the biggest losers as they have had some of the largest gains
in the recent rally. Volume picked up as some that were sitting on
the sidelines decided to move to cash. Citigroup (C) lost over 9% on four times
normal volume. Citi has been one of the highest flyers,
rising over 400% since the market low in
March.
Oil and natural
gas lost ground while gold and silver
gained.
The dollar traded higher
once the trend in the market became
clear.
Buyers did not
come out at the end of the day to rally the
market.
The sentiment has changed in that
we now sell on good news! Sometimes figuring out the market is this
simple.
When the market ignores good news
and sells off or even treads water, it is no time to try to
catch a falling anvil. We closed down 22 on the S&P 500 at
998
Where do we go
tomorrow?
979 was the closing on 8/17, this
will be our first test. If we bust through, then we will look for
support at 946, the close on June 12 What happens if 946 does not bring the buyers
to the table?
Then we drop down to 880, which
was an area that provided support in the first part of July on
a market dip.
Don’t worry, the
world has not ended. The economy is recovering and companies are
clawing their way back to
profitability.
Be careful of what the
crude oil inventory reports are
tomorrow. The market may follow crude if
inventory increased and prices fall. Crude oil probably cannot rally
separate from the general
market.
We need a correction; this will open the door to higher highs
in the future. For some
perspective on the current stock market rally and how it
compares the 1929-1932 bear market, today's chart illustrates
the duration (calendar days) and magnitude (percent gain) of
all significant Dow rallies that occurred during the 1929-1932
bear market (solid blue dots). For example, the bear market
rally that began in November 1929 lasted 155 calendar days and
resulted in a gain of 48%. The duration of the current Dow
rally (hollow blue dot labeled you are here) is longer than any
that occurred during the 1929-1932 bear market. As for
magnitude, only the November 1929 bear market rally resulted in
a better performance than what has occurred during the current
rally to date.
The information presented in this
newsletter is based on generally available news releases,
corporate filings, current events, interviews and the editor’s
opinions.
It may contain errors and you
should not make investment decisions based solely on what you
believe you have read here. Do your own research, it is your
money.
If you lose it, it is your
responsibility, not ours or your
grandmothers!
The editor may or may not have a
position in any securities
discussed.
The editor may have held a
position in a security earlier, or in the
future.
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