No Crystal Ball Here
You will not find in this space any pearls of wisdom
as to when the market will bottom.
As Mark Boucher wrote in his
TradingMarkets.com piece
today.”Crystal balls and labels are not tools of traders but those of the
media.”
Indeed, a member of the media tried to
corner me this a.m., wanting to know when this would all come to an end.
I told him I didn’t know.
On April
4 in this space, I wrote: “Now
that I’ve outlined the case for a bottom in the Comp, I’ll go on to say that it
doesn’t matter…at least to the intermediate-term trader that likes to
concentrate his/her buys on stocks emerging from well-formed bases. Such
bases simply don’t exist…”
For the intermediate-term trader, what
matters is that the averages stage a convincing follow-through day several days
after reaching a low and that numerous
growth stocks begin to build bases.
As simplistic as this may sound, it is
the only method of looking at the market that I know of that offers such a high
degree of probability.
Indeed, since I began using this means
of analysis in 1991, I have yet to miss a major buying opportunity.
For more on this, please check out the
intermediate-term
trading course I wrote with Greg Kuhn.
Separately, beware of the much-watched
put/call numbers.
Don’t assume that a bottom is near
just because the CBOE put/call ratio nears 1.00.
Sometimes the market bottoms around
1.00, and sometimes it doesn’t.
For example, during the fall of 1998,
the CBOE put/call exceeded 1.00 around six or seven times or so (if memory
serves me correctly).
In other words, this is a blunt tool
and no substitute for the objectivity associated with an analysis of the popular
indices and individual leaders.
Friday, among the glamours, Ariba
(
ARBA |
Quote |
Chart |
News |
PowerRating)
(-4%) and Vignette
(
VIGN |
Quote |
Chart |
News |
PowerRating) (-3%) held up best.
Putting It In Perspective: On an intraday basis, the
Naz has dropped 36% in this bear market vs. the 33% loss incurred in the
July-October 1998 bear.
Over this weekend, be careful about
listening to all of the forecasters that will emerge with their
prognostications.
What you want to do is listen to the
market itself — and nothing else.
And no matter how distraught you might
become over any profits squandered or losses incurred over the past few weeks, remember this: Just when the equity landscape looks as bleak as can be,
a brand new bull market will begin, chock-full of opportunities.
In the meantime, don’t force things by
trying to catch the falling knife.
Let the market play its own hand out
before you play yours.