Wednesday, November 19, 2008

I wuz wrong

I was 100% wrong last Thursday to leave the bear den (after about 3 hours). I smartly got out to avoid the bull stampede on a key reversal day, but instead of it being a reversal day, it was actually a short term top. It was a great entry point to short with 20/20 hindsight.

I went a little long (15%) by Monday, but as of today I am back to 97% cash. I took a little hit on one of my gold share longs and broke even on the other.

The morale of the story: It is OK to be wrong, just try to be wrong small.

I now think that the market is going to at least test the 2002/03 lows (around 777) and probably will undercut them. Something around 738 (1997 lows) is possible, and even a move to sub 600 can not be ruled out.

The selling is relentless. I attended a fantastic conference call today by Lowry's, the oldest (and best) technical analysis firm out there. I am a subscriber and they are one of the reasons that I have not lost money in this bear market. They put a major sell signal out on July 26, 2007 and have not looked back since. Their selling pressure is at record highs. I don't want to talk too much about their views as they are a paid service (worth every cent) but they share my pessimism. They were also correct in calling a new bull back in March 2003. They have been right in recent weeks (while I have been somewhat wrong) and I will put even more trust in their service.

I don't listen to anyone who has remained 100% invested and has been calling bottoms all along in this bear market (except to do the opposite, such as Cramer, Abby Cohen, Bob Doll, Ned Riley, etc..) I do listen to those who have been warning about this and who have been mostly right (Barry Ritholtz, Gary Kaltbaum, Todd Harrison, Jeff Cooper, Roubini, John Hussman, Jeff Saut, etc...). And what I am hearing from those who have been right is generally not good. Listen to yourself and your gut in these tough times.

Do you short here? It is very risky as 1000 pt days/2000 pt weeks are always possible. I will probably stay in cash but I would love to put some shorts on as risk remains high.


rick said...

Jeff Rubin was with you. Man, that guy has had some bad luck. You'd have to be lucky to call a bottom based on a one day rally. I was rooting for you! I don't think anyone has a clue about weekly or even monthly trends. Lowry's can be right because they're looking at the long term picture.

Here's my worthless predictions: Markets continue to drop until the dow reaches near 7000. At that point, there will be a short insignificant rally. By the new year, the dow will be high 6000's. Early in January there will be a significant rally to 8000 or more. Then after inauguration, the hangover ensues. The dow bottoms at low 6000s to high 5000s.

I don't expect anyone to care about my guesses, but it's fun to document them.

rick said...

A followup to the GM bailout I posted about on your topic "From Bear to Neutral to Bull":

So my source was correct. If anyone could have picked the GM's low and high today, they could have doubled their money. Anyway, the market in general didn't care, and GM is on its way back down now.

GM will need another bailout early 2009 and maybe that isn't out of the question. Some people believe that Barack has some creative tactics up his sleeve. Like switch the government fleet over to new fuel efficient domestic vehicles. I might just have to gamble on GM when it falls below $2.

Barack is going to try to spend the US out of the recession WWII style: Huge investments in infrastructure, reversing the unemployment trend.

Interesting times ahead.

rick said...

GE and DOW Chem are paying dividends of 10% at current prices. Both have promised not to cut dividends, but nothing is sacred.

rick said...

Apparently I wuz wrong on the GM bailout. A deal was announced at a press conference, but later democrats decided they wanted business plans first.

Adil Burney said...

thanks for the predictions and comments, Rick. GE and Dow will have dividend cuts regardless of what their CEOs say. I have no clue what is happening to GM as that it not investing at this point. While Barack will try infrastructure, the US economy is $15 trillion I believe. There isn`t enough room with a trillion dollar deficit to reverse unemployment. Only offsetting some of the losses in employment.

Jeff Rubin (16000 and $200 oil) should have been in the Cramer category.

There will be a big countertrend rally from some point that may take us to March 2009.