It is all about Timing

What follows is not market trading advice. It is my personal diary, nothing more. Why keep a diary? Because it enforces my personal discipline, prevents equivocation, and forces me to document both good and bad investment decisions. Absolutely, do not use this website for trading advice. Consult a trained and licensed market professional and/or Investment Advisor before making any investment decisions.

Market signals are 'End of the Day', typically in the 15 minutes before the close of the market, unless otherwise indicated, and are applicable only to the broader market, leveraged funds or ETFs, not to individual equities. Chronologically, the most recent market transaction is listed immediately below.

Cover Short - March 5, 2009 DJI 6786 step aside
Profit or Loss + 1487 points on trade

Anticipating a trend change anticipated the last week of Feb or possibly first week of March

Sell Short - November 17, 2008 DJI 8273
Cover Short - November 6, 2008 DJI 8695 step aside
Profit or Loss +895 DJI points on trade 2, +625 DJI points trade 1

I expect a rally and expect it will be short lived which will provide another entry point for short positions. It has the appearances of a technical rally as opposed to a rally coupled with positive economic psychology. It may generate 900 Dow points with a tailwind and some good economic news. I don't believe we have seen the final low. This rally looks like the prelude to beginning the final descent into that low, at whatever level that turns out to be. One day at a time. Looking two days out is an eternity.

There should be a major turning point sometime later this month, maybe around the 20th. At this point it looks like that turning point will be a low. It is my expectation that the market will turn upwards, maybe for several months, from a low around Dow 7800 (most optimistic case), 7200 (the indicated case), 6000 (the worst case). After that we'll have to wait and see.

Sell Short (trade 2) - November 4, 2008 DJI 9585 (adding to October 14th short position)
Sell Short (trade 1) - October 14, 2008 DJI 9320
Sell Short - October 13, 2008 2:00 pm DJI 8980 (position closed - stopped out) Profit or Loss -55 DJI points
Exit Long - October 13, 2008, 09:50 am (closed long position, step aside) DJI 8950 Profit or Loss +849 DJI points
Cover Short, Buy Long - October 10, 2008, 2:00 pm DJI 8111 Profit or Loss +3301 DJI points

September 11, 2008
I’m not trying to be a sensationalist here. My study tells me we should expect a crash-like decline in stocks sometime over the next four to six weeks, starting at any time. Maybe now, maybe in a week, maybe two. Everyone else will probably disagree. The economy and institutions are unraveling fast. Volume is up on stock market declines, shrinks on rallies, and is coupled with lower highs in both the averages and individual stocks. Watch for a lower low which I think is coming.

This coming decline will be very deflationary (housing for example), and if I’m right, wipe out trillions in wealth stashed in hard assets. What then? A massive government stimulus package and hyperinflation policy, which could be the catalyst for a turnaround in declining precious metals and commodities. If they (our brilliant master planners) fail to kick-start the credit creation function at the consumer level real soon, instead of just protecting the banks and financial institutions as the Fed has been doing, I think we’re headed into an economic black hole not unlike the 1930s. Protect yourself my friends. I’m short the market.

That having been said, on a monthly chart of the DJI, I can see 6500-7000 in our future, finding a bottom sometime after August of 2010. In the meantime there could be any number of tradeable corrections in addition to the primary trend. I am expecting a market bounce of tradeable proportions around 10500-9800 and again around 8700, and again in the low 7000s, and again around 6000 (rough estimates from this far away).

There will be any number of daily or weekly market bounces before those numbers, and if I am reading the big picture correctly, they will be short-lived. Nobody knows where the bottom is. The bottom has to confirm itself. Trying to pick the bottom is like trying to catch a falling knife dropped from the roof of a 30-story building. The numbers are my worst case estimates at this early stage. DO NOT RELY ON ANY OF THESE NUMBERS. Instead, laugh out loud. I will probably change my mind by tomorrow morning when I think I have found some evidence that the world's psychology may be changing direction.

Think about the statement we get from the media: "This is basically a market correction."

Everyone thinks/wants divergence from the previous profitable trend to be a correction. Even Lehman's fall was a correction, a severe correction that reflected the magnitude of the excesses in risk assumption that permeate the rest of our society, our federal government, our municipalities, corporations, small business and family units. Lehman corrected to zero, the correct valuation, and took a lot of people with them, including employees, stockholders, pensioners and creditors. The rest of the economy has only begun its correction (if it is only a correction rather than continuation of the longer trend).

Pause for just a moment. Slowly look at the bigger picture and reflect on reality. What product, technology, goods, foodstuff or service does the United States have that it can sell to the rest of the world, something the world wants very badly? Whatever it is, it has to be the source of American jobs, tens of thousands of jobs, in every state. On top of that, what source of energy is the United States developing that will power future industry, plus municipal and domestic uses, at a low price, that will enable an entire nation’s technology, manufacturing and transportation - also the source of tens of thousands of jobs, in every state? What will salvage the East Coast States that will transform millions of minorities and the "disadvantaged" into productive citizens?

Instead, the United States is foolishly turning their own food, having once been the bread basket of the world, such as corn and grain, the only real cash-cow for the last century, into energy, instead of selling their foodstuffs to the rest of the world for a huge profit. On top of that, the US has abandoned its maritime fleet needed to transport goods. Not only are we not growing our own (we import food), we're not making our own (we import our consumer products), and we're not capable of transporting our own (we've abandoned our maritime industry and we're selling our infrastructure, corporations, buildings, highways and seaports to foreign entities), and we’ve abandoned our national sovereignty.

If you are willing to hurt your own mind, try to imagine deflation in all hard assets worldwide, commodities off 50% from their highs, e.g., gold in the $500s, and simultaneously a decrease in the value of the US Dollar to roughly $0.45 over the years ahead. Most people don't think it’s possible. You probably can't find one acquaintance of yours that will agree, which is why I don't publish my views. They probably also don't think 30-year T'Bills will get to 3.5% or lower. I do - lower than 3.5%. Also know that in my experience, housing typically bottoms 12-18 months AFTER the stock market bottoms. Think about that for a minute ..... and for the next three or four years as the commerical and residential housing market continues to decline.

There are always opportunities if you are not standing on the train tracks and refuse to get off and step aside when you hear a train coming. If you are not already debt-free, attempt to get there and keep some cash at home - enough for a couple of month's expenses. I sincerely suspect we may only be in the eye of the hurricane with more yet to come. Don't keep more than $100K in any single bank or securities account. It took us since 2000 to move from the front wall of the hurricane into the eye. Soon we will be forced out the backside by McCain or back into the NE quadrant by Obama.

Market pundits are lining up anticipating a market bounce from what people will "hope" is a bottom, maybe around election time when the outcome becomes clearer. The market will tell us if we have a bottom, and it may take months to be sure that it's more than temporary.

Sell Long, Sell Short - August 26, 2008 DJI 11412
Profit or Loss + 173 DJI points
Cover Short, Buy Long - July 16, 2008 DJI 11239
Profit or Loss +1068 DJI points
Sell Short - June 13, 2008 DJI 12307
Everything before June 1, 2008 has been removed from online and archived

Posted June 1, 2006 08:48 AM
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