<<What's your take on this mess?>>
I'm assuming you're addressing the Nasdaq.
I'm still loving my 100% cash position since March 24. Like I commented earlier though, the wiser man would have been short. Guess I'm not wise. <g>
I see no reason for me to rotate out of my 100% cash position to buy still-expensive pigs that are crashing into the mud, at least given current circumstances. We could retest those Nasdaq lows as early as tomorrow. Who knows, it may even break it as the panic cascades. But don't quote me on that.
A long time ago (and I still do it on a regular basis), an analysis of my hundreds and hundreds of trades revealed that roughly 80% of the time I lost money was when I traded against the trend. That usually meant going long in a downtrend.
A simple analysis of the Nasdaq indicates that we are in such a condition. Since we're getting so low here, the danger is that one initiates a short near the bottom. I'm just avoiding that by staying on the sidelines. Might as well not compound the situation.
An analysis of broken issues reveals, however, that the worst comes right after everyone thinks the market has gone low enough. Check out message #4 of this thread:
Message 12872739
The break happened AFTER declines of 20%-50% had already occurred.
I commented to one of the senior portfolio managers yesterday that the ingredients for a market crack were in place. I added that I wasn't commenting on how the "recipe" would turn out (as so many technicians just love to do--and not often accurately), but I was just pointing out how empirical analysis of thousands of company charts I've looked at have indicated that current configurations have been the precursor to darker times.
The advantage to implementing a flexible strategy where I can change my opinion on a turn of dime is that the current trend doesn't have to turn out as one might expect. General Electric had the configuration, but obvious signals could have gotten you into the right side of the trade. You just have to kick your ego out of the whole picture and just move with the market.
The expense is added trading costs and small stop losses. The opportunity gains are equal to potentially large losses avoided, a market that moves with you, and a growing portfolio.
Rainier
PS. As for the market, I will however, unleash my trading constraints if we hit Nasdaq 3XXX.<-- a good trader never reveals his exact intentions. <-¨o> |
