March 18 2001 Strategies...
..You are trying to decide on a strategy. Let me try for a couple of cents worth of ideas.
The general feeling, it seems, is not to have any strategy at all, just to sit and wait till the carnage is over. Ergo, it’s probably a good time to try to develop a strategy.
Elliott waves reflect what is basically a completed downswing. It means the odds are we are near at least a near-term bottom. The waves, like everything in this game, deal in probabilities. They sometimes "extend", or get "truncated", or require "re-labeling" and so forth. One may say, they are almost as capricious as people’s interpretations of "fundamentals". But they do help.
The avalanche of negativity everywhere is outright bullish. I just saw a part of the "bulls and bears" show on TV, and they seem to have a bearish consensus.
For the past many weeks and even months I was fascinated by the growing dichotomy between the NAZ and the DOW, wandering whether the DOW would hold, or Join the party to the downside. I wrote a fair number of "DOW indicator" posts. IMO, the jury is still out. The critical level seems to be around 9650, the October and more or less last March low. If this level is broken then we clearly have a downtrend in the DOW, and more selling will take place. To me this would be reason enough to quickly decrease some positions. On the other hand, for as long as this level holds, IMO and IMO only, it is acceptable to nibble. Personally, I will not wait till April to do so. I already started, but so far too early ;>(
The issue of greatest importance here is Money Management. I think one should forget about being fully committed to the markets until much better days are clearly back, whenever that happens. Use stop losses as much as possible. I like to correlate my stops with the movements of the larger market, like in the discussion of the DOW above.
Good luck,
AK |
