Reversal Day?
Research for Online Investors

by John Dalt

8/3/11

The market looks like somebody threw a bucket of red paint all over my computer screen. What do we do…buy stocks. We are busy in the market today. Our Long-Term subscribers sold stocks for the last five weeks…and now it is time to buy. We have bought nine positions this week.

It just doesn’t get much better than this!  You have to love it when a plan comes together.  But, what if the stock market goes down more?  Do you really think you can determine when the absolute bottom is in?  No, we do not.

The best thing you can do is have a list of stocks to buy when the value is irresistible.  We have been doing that work all along.  Every stock should have an identifiable safe buy price.  You cannot be caught up in the gloom and doom any more than you can afford to jump aboard the euphoria around a stock that is going parabolic.

Here is a chart of the S&P 500 for the last 17 months.

You can see the strong support at 1149, dating back to March 16th.  We didn’t key our buys off this support line.  I suggest you set an optimum buy price for each stock you are watching.  If you have done your technical work correctly, some stocks will hit your buy price before the market hits support, some just as, and others may not at all.

This is not an exact science!  The market may go down further, but you have bought stocks at a price you identified as a value on the underlying business.  You can take comfort in that feeling of purchasing when others are scared and selling.

As we are going to press the market is making a run at a reversal, but we are done.  The money is on the table and now we can relax and watch our results from our “hard” work.  If the market finishes the day in positive territory, this would be called a reversal.  This would give us a strong indication of a bottom in the market, for now.  We wrote our subscribers to the Buy, Sell, Hold service that Tuesday looked like “capitulation.”

We missed one headline event from our list yesterday of things that happened While You Were Sleeping.  Kathleen Sebelius is Secretary of Health and Human Services (HHS).  She announced on Monday that insurers will have to pay for birth control with no co-pays. Coverage will include breast pumps, counseling on domestic violence, birth control pills, intrauterine devices, morning after pills, annual HIV counseling, annual sexual disease counseling, preventive care appointments and screening for cervical cancer.

Officials with HHS were quick to point out this will not significantly increase the cost of insurance.  The agency got a near unanimous recommendation for the new coverage from the Institute of Medicine, the Dean of California’s U.C., and the National Women’s Health Network.  It is a good thing the congress was able to slow the growth of government in the debt ceiling bill.  This will blow the cost of National Health Care under Obama even higher.

Thanks to subscriber S.V. for sending in this cartoon about the recent contortions of the truth in Washington to raise the debt ceiling.

You can read the Budget Control Act of 2011.  It does not control the budget unless government growing at a slightly slower rate than 7.5% is control.

The mailbag:
I am politically independent and I do not want to read about Republican politics in investment newsletters. The commentary in today's newsletter about the economy growing with low tax rates is just plain wrong, as demonstrated by the Bush years. I am not interested in investment commentary from ill-informed right-wingers.---subscriber P.S.

John’s reply: There are no independents; either you are for freedom and less government, or you are for a larger government. It is like pregnancy. If you have investment funds, you should be scared of a government that wants to help you with money they will take from those who have “too much.” Here are the facts in chart form:

You can easily see the dip the economy took after the attacks of Sept. 2001. Then with lower taxes the economy regained its footing and expanded until 2007, when the clouds started gathering that lead to the credit crisis of 2008. One would be remiss to not point out Nancy Pelosi became Speaker of the House and Harry Reid became majority leader in the Senate in 2007. Coincidence?

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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