Stock-Market-Observations

After being stopped out overnight, I re-bought early today at a lower price than my stop sale.

The market was hit with some bad news, consumer sentiment was as bad as April 2009.  Things aren’t as bad as they were in early 2009 but if the consumer continues to believe it, it could come true.  It’s the old FDR refrain, “the old thing we have to fear . . . . is fear itself”.

After looking at the chart below, I relabeled the wave count slightly and came to the conclusion that we are not going to get the wild ride rally until we have started the third step up.  If true, third step will probably be an extended step up.   We still could have the breakneck type rally but this market seems to be looking over its shoulder too much.

Counting from last Friday’s bottom, I think we are currently in step 2 up with more to go on the upside.  As I said before, it should be a good week.

Jeff Saut had said on Monday that he would be a buyer of stocks if they could close above the 1208 level in the SP 500.  We are trading above that level presently.  I think it likely that we could close above 1208 today.

Several of you that read this blog have said the exact same thing.  They don’t want to buy when they can’t see a good reason.  Everything is so bad, the market can’t go up, yada… yada… yada.   Often times WHEN you take a position can be more important than WHAT you take a position in.  This is an important part of investing, timing your purchase.  Taking a position after a bloodbath is much better than buying just before the bloodbath.  And it’s VERY common technique for the average investors to buy during a period of great euphoria on Wall Street (just before the bloodbath) instead of buying during the blackest gloom.

MUST reading is the Wall Street Quotes on the right side of this page.  Most are good advice and a couple are jokes.  An example of the quotes are:

The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.
John Templeton

Buy on the cannons,
sell on the trumpets.
Old French Proverb

The public is right during the trends but wrong at both ends.
Humphrey Neill

“I sell euphoria and buy panic.”
The way he determines that is to wait until prices start gapping in the charts. Gapping on the upside is euphoria, while gapping on the downside is panic.
Jimmy Rogers courtesy of Jeff Saut

When to buy was put very nicely by Jeff Saut in his Monday comments:

The call for this week: Just like the surfer interviewed over the weekend who grabbed a board and leapt into the Irene-induced waves, investors need to “grab a board” and catch a wave if they want to achieve investment success. But to do that, first you need to get into the water! The time to stand on-shore was months ago, not after a ~20% decline in the S&P 500 (SPX/1176.80) from its intraday high on May 2 to its intraday low on August 9. While we have been pretty conservative in our stock recommendations over the past three weeks, we would become more aggressive if the SPX can break out above the recent rally-high of ~1208. And while the odds of a recession have clearly increased (to 30%), my hunch remains we will avoid it. Accordingly, I will leave you with this quip from our restaurant analyst, “Every casual dining company that has spoken to Wall Street has said they have seen no evidence of behavior change despite all the scary headlines of the past six weeks or so. If we have a recession, this would be the first one in my 25 years as an analyst that was not foreshadowed with weakness at full service (the most discretionary) restaurants.”

08-30-11 DJ INDUSTRIALS DAILY BARS

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This entry was posted on August 30, 2011 at 9:41 AM and is filed under SELL - BUY, UPDATE. You can subscribe via RSS 2.0 feed to this post's comments. You can comment below, or link to this permanent URL from your own site.