Here’s The Biggest Question We Face Right Now
It may be difficult to
believe we are only in a correction and not something more serious,
but that is something I firmly believe based on historical evidence.
The stock market currently faces uncertainties with the elections, Iraq, oil,
the economy and interest rates, but in the end it is probably just working
through a bottom that started in October of 2002. Over the last 100 years, the
stock market has only faced declines of the NASDAQ’s magnitude once and that was
back in 1929 to 1932 with the Dow. After working higher for a year (1933) the
market went into a corrective phase almost identical to the one we are currently
experiencing.
This phase is give many stocks that faced extreme pressure a chance to recover
and get rid of weak stockholders that got caught in the declines of the past few
years. Moving forward, there will be a few new names that may emerge as leaders.
Research in Motion (RIMM) may be an example.
^next^
We will probably also see tons of old leaders that were oversold rally back
towards the higher end of their multi-year ranges. Internets like Ebay and
Yahoo!, and other former leaders such as Qualcomm (QCOM) have already
started.
The biggest question we face right now is how long will this correction last
before the next inevitable rally? Based on history and the chain of events
leading up to resolution of the current uncertainties; it appears that we will
be ready to launch a move towards the latter part of this year or earl 2005.
The NASDAQ set a bottom of around 1100. I don’t believe that will be breached,
but 1500-1700 is an entirely realistic range. It is extremely important not to
rely on this but rather follow price and volume for the bottom. Eventually, we
will see a shift from selling to accumulation as the NASDAQ is able to rally on
heavier and heavier volume. For now, the best thing to do is sit back, wait and
hang onto capital until the time comes when the chances of making money is
greater.
Tim Truebenbach