Here are my thoughts for the next few months:
We are certainly witnessing unprecedented times in the financial markets. More people than ever will be retiring in the next 10 years, and many are scared/annoyed/clueless about what is happening to their stock accts.
As I was running today, I was playing around with different scenarios. I was anxious to get to the charts and see what I see. I have been so wrapped up in day today 300-500pt moves, I decided to look at a weekly chart.
To take some sweet emotion out of the market:
This is what makes sense to me:
We will be in a sideways (but volatile) environment from now through the rest of the year. The Government has pulled out all the stops, many of which I despise. But for now, the thumb is in the dam and it has bought us some time. Last month had the highest retail exodus from managed accts, I suspect this month will be even greater. Public is great at getting out at the bottom.
I am holding on to my long positions and Mutual funds here, which I bought last wednesday. I expected Monday’s selloff, and some lift from Ben and Henry’s comments on tuesday. And now I see a medium term (now through December) bottom in @ S&P500 @ the 1190-1200 level. I think we probably move sideways to up and touch the upper downtrend line (Purple). Perhaps moving up to S&P 1290-1310. However, as this is happening we are still in an undeniable downtrend. I won’t be complacent! Anything can happen here! IF we see breaks below S&P 1180 it could get pretty intense in the markets again.
I am regaining my composure in this market, and I think there is a bit of upside here. I feel very fortunate to have weathered the market well. My personal accts are mostly in cash at this time, and I am ready to put some money to work here.
Although you may not be able to read this chart, please don’t dismiss the information. How many people do we know who say, “I am a long term investor”. With those words and subsequent actions, a person’s acct is down AT LEAST 20% from the market highs. Here are my thoughts:
We will be in a sideways (but volatile) environment from now through the rest of the year. (Government wants to do anything it can to keep the economy propped up into the election).
If we drop below 1180 on the S&P 500 this week, delay taking action on the below comments.
From now through the middle of January.
The range will be sideways to up. S&P 500 – 1200 to 1310 (possibly as high as 1350 with the uncertainty of the election gone).
Volatility will remain intense.
As we start to move up above the 1265 level, the TV personalities will be telling us how we have bottomed. And time to buy. They have been wrong at least 5 times Since Aug 07. I believe they will be wrong again. But most retail investors will follow their lead and promptly buy the next lower high.
There is an enormous amount of leverage in our markets. Estimates of 5 Trillion of derivatives still need to be unwound. Simply stated, there is a lot more selling that needs to be done.
Using some basic forecasting, I see the next major price resolution down in the S&P 1100 area. I will be looking to play a bounce in that area, probably sometime next spring/summer. That would coincide with a 61.8% retracement, and a Wave 4 low (weekly)
If I had 100% allocated in stocks at this time, I would sell 25% of my holdings @ S&P 1265. Sell the next 25% @ 1300, and the next 25% @ 1350. And start buying back in with 25% increments above 145. But that is just me. By the middle of 2009 I will be scaling back out of stocks, as the US demographic fundamentals start to significantly deteriorate.
I think we may see one more commodities push from now through the middle of 2009. (but, we will see about that one). It’s worked once already right 😉
I am also looking to get short the Euro vs. US$. I’d like to find better option alternatives than XDE, but I may just use the DRR.
Euro/US$ daily – 50% retracement and 50 day MA from July highs is 149.65.
61.8% retracement and 200day MA are pretty close as well, 152
This is not designed from someone other than me use as a blueprint. For I am an enthusiastic snowpro, not an investment professional.