On Wednesday after the market closed, everyone was talking about a market rally (from the reports I saw/read). Up 130 points was just the move that was the result of restored confidence, but not only that, it was going to trigger further rallying. Well, Thursday showed market participants that the bear is still more likely to eat Goldilocks than give her some porridge (or money for that porridge).
While short term traders should play both sides of the market and make money in any which they can, investors should not be buying. I have said that investors for the most part (unless you need to buy a few million shares) can slip easily into the market, so there is no reason to buy until there is a significant move upwards. A 130 point move up, despite what the many of the news reports seemed to think, is not a significant move.
From an investing standpoint, we are a ways away from an entry point, which I would view as a reversal to this bear market. Thus I won’t even publish an entry point for the long positions. No point losing money when you can just keep it as is for the moment.
There is no need to pick bottoms to make money.
But lets look at the broader picture of the market once again. From Jan 1942 to 1965 the market went from approximately 100 to 900. It multiplied by 9X in 23 years. Then from 1982-2007 it went from 900 to 14000. It multiplied by over 15 times in 25 years. Thus in about the same amount of time, gains were accelerated by more than 50%. That is quite an improvement. What caused this massive acceleration? (I have left out 1965-1981 as the market was range bound during this time and did not reflect any growth, actually negative growth when factoring for inflation, over that 16 years)
In my opinion, perception. Perceptions changed. Just as in the microcosm the 90′s investors believed we had entered a new era of unlimited potential prosperity and perpetual growth, the last 25 years has been filled with this new era type thinking. Market participation has increased in terms of volume which then created a need for government and businesses to focus on short term gains. With a the seeming positivity bias built into the market, participants chased short term gains to higher and higher prices (on the aggregate over the last 25 years). But when major catalysts changed that sentiment and major fundamental flaws were revealed it became apparent this market was in severe trouble. Hence, why I use technical analysis for trading and talk about fundamentals for fun.
Are these numbers I used above somewhat arbitrary? I suppose on could argue so, but looking at a multi-decade chart I picked the major trends since after the great depression. The point is that there has been a major acceleration of growth in the stock market and now we are seeing a major acceleration to the downside to correct for this.
I am currently sticking to my target of 6000. The Dow closes at 6594 on Thursday. I will reconsider this downside profit target if a close above 7000 occurs anytime soon.
The Non-farm Payroll Report comes out on Friday, always a big mover, so watch for that as it could take us a lot close to either of these levels.
~Cory Mitchell
Dow Catches a Chill From Falling So Fast
On Wednesday after the market closed, everyone was talking about a market rally (from the reports I saw/read). Up 130 points was just the move that was the result of restored confidence, but not only that, it was going to trigger further rallying. Well, Thursday showed market participants that the bear is still more likely to eat Goldilocks than give her some porridge (or money for that porridge).
While short term traders should play both sides of the market and make money in any which they can, investors should not be buying. I have said that investors for the most part (unless you need to buy a few million shares) can slip easily into the market, so there is no reason to buy until there is a significant move upwards. A 130 point move up, despite what the many of the news reports seemed to think, is not a significant move.
From an investing standpoint, we are a ways away from an entry point, which I would view as a reversal to this bear market. Thus I won’t even publish an entry point for the long positions. No point losing money when you can just keep it as is for the moment.
There is no need to pick bottoms to make money.
But lets look at the broader picture of the market once again. From Jan 1942 to 1965 the market went from approximately 100 to 900. It multiplied by 9X in 23 years. Then from 1982-2007 it went from 900 to 14000. It multiplied by over 15 times in 25 years. Thus in about the same amount of time, gains were accelerated by more than 50%. That is quite an improvement. What caused this massive acceleration? (I have left out 1965-1981 as the market was range bound during this time and did not reflect any growth, actually negative growth when factoring for inflation, over that 16 years)
In my opinion, perception. Perceptions changed. Just as in the microcosm the 90′s investors believed we had entered a new era of unlimited potential prosperity and perpetual growth, the last 25 years has been filled with this new era type thinking. Market participation has increased in terms of volume which then created a need for government and businesses to focus on short term gains. With a the seeming positivity bias built into the market, participants chased short term gains to higher and higher prices (on the aggregate over the last 25 years). But when major catalysts changed that sentiment and major fundamental flaws were revealed it became apparent this market was in severe trouble. Hence, why I use technical analysis for trading and talk about fundamentals for fun.
Are these numbers I used above somewhat arbitrary? I suppose on could argue so, but looking at a multi-decade chart I picked the major trends since after the great depression. The point is that there has been a major acceleration of growth in the stock market and now we are seeing a major acceleration to the downside to correct for this.
I am currently sticking to my target of 6000. The Dow closes at 6594 on Thursday. I will reconsider this downside profit target if a close above 7000 occurs anytime soon.
The Non-farm Payroll Report comes out on Friday, always a big mover, so watch for that as it could take us a lot close to either of these levels.
~Cory Mitchell