The Evidence Still Stands…

• January 28, 2003
• Tim Truebenbach

The market was finally able to
rally on Tuesday after the declines began on 1/15. The question to
pose is whether or not the gains will be a one-day affair, such as was the case
on 1/23. 

 

 

 

The evidence we have seen as January moved along still
stands: sufficient distribution to believe the market’s trend is down. We
also saw the market breakdown below the 12/31/02 lows. For now, rather than
fight the trend, it is best to stay on the sidelines and preserve capital. For those of you that are willing to take on small short positions, low-volume
rallies may be the place to start.

 

This strategy may sound boring to some of you, and I agree. The
fact remains that it is absolutely necessary to maximize larger gains when the
time comes. Stay motivated by remembering that we just finished three negative
years in the stock market.  Historically, this amounts to one of the worst
markets ever. If 2003 were to close negative, it would be tied for the worst
string of losing years in a row ever. I firmly believe that when everything
looks its worst, we’ll already be inching higher. 

 

We’ll start to see stocks like
Marvel Entertainment
(
MVL |
Quote |
Chart |
News |
PowerRating)
continue to hang on to gains from a breakout even while the market is
declining.

 

 

Stocks like Cognos

(
COGN |
Quote |
Chart |
News |
PowerRating) will find strength as
institutions buy stock instead of sell it without mercy.

 

 

Ultimately, I believe now more than ever that the US
stock market will eventually find its way out of the doldrums that come with a
bear market. We have faced adversity before and worked through to higher
stock prices. The most important lesson to apply is that capital preservation
during these times is invaluable. The next step is making sure that while
preserving capital, we are able to capture the next Bull Market as it begins.

 

Until Thursday,

 

Tim