GM, Sam, Stitch, Yogi, LK, all. A couple of nice posts from Rudy on the APM thread. I'm not saying this is the strategy for anyone to use. But it is a strategy that some people try to use.
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www3.techstocks.com
Talk : Short-Term : APM
To: WTMHouston (12584 )
From: Rudy
Monday, Aug 31 1998 6:27PM ET
Reply # of 12587
>What is past, is past. The real question now is: Are we done and is this now a buying
opportunity.<
Problem is IMO it is not "past" yet. I would never buy into a falling market with a lot of
technical damage but it is me. I do not believe in the "long run" strategy. Why shouldn't I
get out if I can in the face of a down momentum and sit and get back when the
momentum reverses? I do not claim that I'll be able to locate the bottom correctly but if
I can buy back within 20-25% (upwards) of a bottom (on individaul stock basis) I can
make significant gains. Just the fact that a 50% fall requires a 100% comeback to
breakeven justifies my strategy.
>One month ago, we would have all been chomping at the bit to be able to buy almost
any stock at today's closing prices.<
Agree but that is all deceiving because of the new momentum investing craze. It cuts
both ways. Up up up, or down, down down. They all value as much as the next guy is
willing to pay for, no more or no less.
For a long term outlook (say 2-5 years the least) you are right. What you pick here will
probably look great 2 years later that is if your picks are solid companies with a proven
track record (IBM's, the Intel's, the Dell's). But for the short term what if we fall more?
I would rather wait for a basing pattern and an upward breakout to recommit cash. At
that point our entries may be the same (yours on the down, mine on the up). The
difference is that I'd have kept my options open and been more flexible than your
committed position.
>Reality will catch up, IMO.<
Reality has taken the back seat in a world haeding more towards virtual reality.
Everything is sliding more towards virtuality. Market took its share. Was AMZN trading
at 150's real? If it gets trashed down to 20 would it be real? What price would really tell
you the value of AMZN? When the rate of change is accelerating, nothing is stable
anymore. That makes evaluating companies harder than ever.
That's one reason momentum investing has gained tremendous popularity in the last
decade.
>I am not a technical guru by any stretch, but this has to scream oversold!<
This is another unimportant indicator IMO which lost its importance.
Oversold-overbought. AMZN was overbought from about 56 to 150 but that did not
stop it. Same way it can be oversold down to 10 who knows. Again momentum
investing is shattering all known rules of trading/investing.
Anyway, it's been long. Troy, this is just my strategy. There could be 1000 different
ways to make or lose money in the markets. I just put my thouhts without any offense
intented.
Best wishes.
========================
www3.techstocks.com
Talk : Short-Term : APM
To: marc chatman (12586 )
From: Rudy
Monday, Aug 31 1998 7:24PM ET
Reply # of 12587
>Has the market ever seen a major correction, bear run or blow-off where the averages
haven't at least made a serious retest of the lows?<
I cannot answer this from my own experience :-). At least on the overall market basis
(on individual stock basis, I can). From what I read and heard from respected
technicians, the answer is no. Technicians (from experience and study of history) say
that any major break needs to retest its lows before a meaningful rally and also has to
make a new high to consider as a "recovered market". So what we need here according
to technicians is a rally to a lower high, and then a retest of the low (whereever that
would be) and then another rally to new highs. Now the dimesions, the width of the
movement, length of it (time) will be determined by outside effects, probably overseas
and psychology. Technicians do not look at reasons. They look at supply and demand.
From my individual experience with stocks, breakouts (up or down) most of the time
retest the support/resistance levels. That's why it is recommended to commit 50% of
your planned buy in the first breakout and then commit the next 50% at the confirmation
(retest and bounce back).
With that logic it may not be smart to sell (or buy) into these panic runs. Smart investor
sells into the rally if the overall picture looks grim (like now). It looks to me shorting the
next rally is lot less risky than buying into it.
Dow is testing support at 7550 now. Even if it finds support, my best bet is it'll move
between 7550-8260. We acquired a lot of resistance lately. It'll take time to forget
these wounds even if all outside effects clear out.
I do not wanna sound all bad but I just think it is looking really ugly from the technical
perspective. I believe usually fundamentals justify the technical picture shortly after
(insiders move out earlier than outsiders :-)). Maybe some global concerns are worse
than we can think and foresee. Guess that we'll see soon.
Take care.
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