Patience, My Friends!
It is very
important to get past the wild action at this point in time and keep
emotions in check. The fact is the market had a monstrous day on Tuesday, in fact, record gains. I continue to urge you to go slow. Tuesday’s
action is just a start, the first day of an attempted rally. Just think how many
5% days the Nasdaq has had over the past few months, only to fail badly several
days later.
Do not listen to any news or any noise. Just watch the action of the market. If
Tuesday’s action was the low, the market will get a strong follow-through day
very soon. Then you should start to see a bunch of names coming out of nice
consolidations. Stop right there! There are hardly any good-looking charts in
the glamour complex. The few that have showed some strength reversed badly
yesterday.
As I look at today’s New
Highs List, I find a bunch of regional banks, insurance, miscellaneous finance,
Savings and Loans and a smattering of other not-so-exciting sectors. These are
hardly the leadership that will take us out of this brutal nine months.
I also want you to know that the psychological profile for a major market bottom
is nowhere in sight. These secondary indicators have worked very well at
important market turns as the numbers usually go to extremes. The percentage of
bullish advisors are at a number that would befit a market top, not a bottom.
Put/call ratios are showing much too much complacency, even after this huge
drop. Keep in mind, these are secondary indicators. I give all weight to market
action first.
Patience, my friends!