How much lower do you think we are going?
For the market in general, I think, we may have a bottom in place but we could revisit it or even go lower if the current financial crisis faced by banks is not resolved soon. Next few months are critical.
When we have a rally with 9:1 breadth on the upside on extremely heavy volume (3x or more) we will have a bottom in place for sure. I don't think, we have ever emerged from a significant downturn without such a rally!
Are you shorting anything?
I don't have any problem with shorting. There is a point though when the market will bottom despite all the gloom and doom.
I have been shorting on and off for a while but now only in tight ranges and I am quick to cover my positions when they head down in market volatility. I am sticking to names where fundamentals are going to be weak for a while, so that I do not get caught off guard. It is no secret that I believe fundamentals are weak for WFR, LRCX, etc. and are unlikely to improve anytime soon. They will bottom out in the coming months but are unlikely to go up meaningfully for a while. If they do, I will repeat my cycle of shorting. I do my own research and I am willing to have a healthy, civilized discussion with anyone who is willing to take an opposite view.
Unfortunately I cannot say this enough; The market will not bottom until financial stocks stop falling. This is not the kind of a chart that says market bottom just yet:
I couldn't agree with you more. Financial stocks have to stabilize before the markets can go up. Financial stocks cannot stabilize until writeoffs come to an end. Writeoffs cannot come to an end until housing prices stabilize and the economy stabilizes. Housing prices do not stabilize until people stop losing jobs and existing inventory of homes get transferred to strong hands. This is a vicious cycle and it has to be broken soon else the economy will get more weak as problems spread to other areas- commercial real estate, credit card debts, business loans, etc.
The government needs to address the crisis from multiple fronts. Create jobs, lower mortgage financing for qualified buyers so that inventory of unsold homes can go down, restructure problem loans so that inventory of unsold homes doesn't grow, restore health of banks so that they can start doing what they are supposed to do, etc. |
