Rande Is: I think your post is on the right track but the timing is off. As bad as things are, the worst is yet to come. I went 100% cash in mid-February because the Dow began to experience weakness. My gut feeling was that the "tech wreck" was about to spread the the Dow and the general market, converting the bursting of the tech and internet bubble into an authentic bear market.
The Dow (IMO) will continue to fall toward the 9000 level and the remainder of the market will remain weak between now and April 15th. I believe the Fed will cut interest rates by "only" .50 points, resulting in disappointment and further selling. Additionally, the weeks leading up to the income tax deadline have been quite weak for the past three years. It will probably be even more so this year. The small investor is finally beginning to realize that many of the tech stocks they have ridden to the bottom will not bounce back (or, if they do, it will take several years). They will be selling these stocks as "losers" to pay taxes, generating tax losses for next year or later this year. The tech stocks will see continued pressure over the next month, bringing the NASDAQ down to 1800, possibly 1600-1650.
I remain on the sidelines until the NASDAQ either approaches 1600 or shows some signs of stability. At 1600-1650, I don't care what the technicals or the market sentiment is -- I will be aggressively be buying the QQQ's using the leveraged Pro Funds Ultra OTC (UOPIX) fund, which doubles the NASDAQ 100 QQQ's movement, as a LT holding for the next 1-3 years.
My point: it is still too early to re-enter the techs. However, this will be the winning strategy after the next earnings season and tax deadline are out of the way. Money will not be made in the defensive sectors that have become the analysts' darlings, which are now richly valued. |
