Things are lining up but we aren't quite there yet

The market has acted rather poorly following Friday's ramp. Despite all the bullish contrary indicators it trades heavy and has the feel that it wants to go lower still. I mentioned in my prior post some of the nagging doubts I had about the final bottom being in. Again, I respect the notion that we can make a bottom right here and now because we are seeing some rare extremes in sentiment indictors but the market isn't confirming the bullish case right now.


Based upon what I see out there, bulls out there like Cramer are feeling very frustrated and hopeless. Trader types are shrinking their holding periods more and more as headlines are dominating the action. These 2 notions are telling me that the buy and hold strategy is going to come back into favor soon and we are close to hitting a LT bottom. Yup you heard me buy and hold is going to be the right way to go soon! Does it make you sick to your stomach to consider buying and holding right now? If the answer is yes then it means that odds are high it's the right thing to do! I find that the queasier I feel when taking a position the higher the odds of me being right. Anytime I've made a trade or comment about the market and felt completely comfortable it tends to be wrong! Does this not happen to you?

This atmosphere of hopelessness and gloom right now reminds me a lot of early 2009 whereby the market was making its final sell-off of the bear market. If you bought stocks starting in February of 2009 you would have felt pain for about a month but it ended up working very well if you held. That's kind of where I see us right now. If you put a gun to my head I think we will get one last push lower to the July lows or even lower, then at that point I think the market is going to make a solid bottom. Do we do this now or after a big bounce? That's tough to answer. This is a very, very tricky tape with so much noise action in both direction but I think we will indeed see a flush towards the July low.

My plan of action is to selectively build long positions with minimally market correlated equities as an "out" in case the market does make a final cathartic sell-off. I will also attempt to play this downside flush that I think is going to happen. I stress the word attempt because I'm mindful of the upside potential and the noise of the tape. If in doubt I will stand aside.



No matter what the market does, my number one investment of all time that I will never sell is this