On this Iraq deal, the Desert Storm scenario was:
"Sell on the news, buy on the combat." But this time, I think it may be different. I thought Billy would bomb Iraq last summer (before the elections) to try and cover for his little boo-boo . If he decides to drop some Xmas gifts on Saddam within the next two weeks, I think the general public will interpret it as an attempt to draw attention off his possible impeachment. The real reason the market is weak, IMHO, has nothing to do with Billy or Saddam, but if something turns sour with them, I think the Average Investor will start to panic, and the REAL weakness in the market will be exacerbated.
Panic selloffs are pretty easy to spot on a one minute tick chart. I just look for the same pattern on the daily chart on the index, and it's pretty hard to miss. That's one of two times when I like to go long. Look at the SOX over the last 2 years and you can see the buy and sell spots pretty easily.
Range indicators, such as Bollinger Bands, coupled with volume increases, are pretty good for locating bottoms on panic selloffs. Most people don't pay much attention to the time that a stock spends in a critical range (for example, time spent below the band after piercing the band). I've seen a stock go one way when time is short and another when the time is longer, even though the overall pattern is almost identical. So, if I go long on a panic selloff and the stock doesn't do what I think it should right away, I've got a clue that it ain't gonna happen, and I can GTFO without Severe Emotional and Fiscal Damage. Theoretically. |
