Hi Gottfried! I had to laugh at this comment:
>> Jim_p asked me about the SOX bottom and I answered without hedging because I hate weasel words. <<
Weasel words? How do you avoid weasel words in weasel times? <LOL> Damned if I know, but you bring up a very valid point. Being a weasel here, at this point, can make the difference between someone who makes exceptional gains to someone who can potentially get wiped out.
So let's take a look at what we have and try to determine how we can take "the weasel" out of investing, and at the same time make the right decisions.
On the side of the bulls, we have Greenspan continuously slashing interest rates, Bush spending billions of dollars we don't have, hoping to provide a spending stimulus, a market that has been beaten down so bad that long term money is doing some accumulating, and the ever-bullish Abby Joseph Cohen being more bullishly bullish than ever. We have hope and the American spirit that things will always get better. What more could the stock market want?
On the side of the bears, we have earnings at record lows, earnings that aren't expected to rise next quarter either. We have a record number of jobs lost, a record number of bankruptcies, a record number of credit card delinquencies, a larger number of people with lower consumer confidence levels. We still have a large number of CEO's without visibility, lower capital spending and a war that is certainly going to create more uncertainty. How can this market sustain a continued rise in the face of these uncertainties?
In addition to all this, we are also faced with recession and possibly inflation.
Too much optimism. Too much pessimism. What are we to make of it all?
I think the answer lies in the way we practice our asset allocation. I think most people have over-weighted their positions in the past, to one extreme or the other. All energy, all long, all short, all small cap tech and the list goes on.
I'm of the opinion that this is the best time to be a weasel. Weasel investing, in my opinion, would be taking the best of both worlds and putting them in practice.
I think this is an excellent time to pick a stock or two that you think would go up if things truly are improving, but you are willing to hold a year or more in case you're wrong. I think retail and consumer staples are a couple of good examples here.
I think this is an excellent time to short a stock or two that historically underperforms in poor economic times. Perhaps advertising, travel and even a stock in the home-related field may qualify at times like this.
I think this is a time when one should look for balance in their investment outlook. Playing both ends towards the middle looks like the way to go in my weasel eyes. <ggg>
For the more adventurous, pick the stocks that were hit the hardest in the last couple of weeks and hold on for dear life.
Regardless of investing strategy, I think it would be prudent to buy smaller positions than you normally would. If you usually buy 1000 shares, buy 400. If you normally buy 5000 shares, buy 2500. Why? Because we're in uncertain times and the market may not move in the direction we choose. It may be necessary to defend your position by adding to it.
Looking at the NASDAQ today, decliner's outpaced advancer's on below average volume. This indicates the market internals are weak. I mentioned last week that the NASDAQ wouldn't close that gap between 1621 and 1669 on this last run and it appears that comment is true so far.
Today the NASDAQ got to 1621 and retreated. The NAZ seems to fear that gap!
stockcharts.com[h,a]daclyimy[d20010701,20011009][pb20!b10!f][vc60][iut!La12,26,9!Lh14,3]
Some positives and negatives, (weasel points), with regards to the chart:
A gap up in the morning, into that open window between 1621 and 1669, would cause the shorts quite a bit of discomfort. If the NAZ can reach into that open window, I think a short rally can cause it to move and close above 1669. If that occurs, you'll have seen your bottom and the breakout will establish a new bottom at 1669.
Now this is important, take a look at the MACD Indicator! Those bars that look like volume bars, aren't. They don't measure volume, they measure momentum. In spite of the weak market internals, momentum is on the rise while the NAZ is trading sideways. (Another bullish divergence?) Sneaky little weasels, aren't they?
On the other hand, Stochastics show the NAZ as being overbought and due for a pullback. Earnings are due out this week and they could cause some more near term uncertainty.
We still don't know if any further terrorist attacks are coming and how the markets will react to them if they occur.
Absent any further war related uncertainties, I think this is the week that determines the direction of the NASDAQ. If it holds its gains, or fills that open window gap, the worst will be behind us until next quarter.
If not, then the weasels will still be among us.
dabum |
