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Strategies & Market Trends : Waiting for the big Kahuna
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To: Chip McVickar who wrote (17960)5/14/1998 8:08:00 AM
From: Arik T.G.  Read Replies (1) of 94695
 
Chip,

The covered call + shorting the index after the trend change strategy looks very promising, but requires that you will take hard decisions.

Since Aug '97 I was promoting two scenarios. One was that the top was reached Aug 6th, and the bear would grind the market down to 4500.
The other was a run to over 9000 in spring '98 and then the biggest crash you ever saw.

After the recovery from the Oct mini crash I was left with one scenario. Therefore it is clear why I recommend selling a long term
portfolio at the current levels, even as I believe another run to 9800 is possible.

Buy and hold was a good strategy for 15 years, since Dow 800 in 1982.
Stocks like MSFT and DELL showed tremendous gains.
This cannot last forever. Everybody knows that, but almost everybody ACT as if this market is perpetum mobile, and as if risk is not a factor in the risk-reward equation.

I repeat my recommendation- Sell now, buy back much much lower, after the bear is 2-3 years old- but if you want to see the long term trend change first, then you have to wait till the Dow will break the 200 DMA (around 8200), and sell on the rebound.
My guess is that the Dow will correct from around 7800 to around 8500.
And that would be the first correction UP in a long term down trend.

ATG
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