Monday, November 03, 2008

Gloomy Market Continues

We went through 900+ stocks yesterday in hopes of finding something, and we found worse then nothing. The market continues to look like one big short setup in development.

The sideways to up consolidation that has been ongoing for about the last 3 weeks should last another few weeks (1 - 5). From there I believe we will take another leg down to, at a minimum, test the lows for a few weeks (5 - 8). Then we get a tradeable rally. The play won't be your traditional bases in most cases, but deep bounces off of MA's or just under MA's. Too far away to try and figure out how long the rally could last. After that rally, the accumulation phase will begin, assuming economically we start to stabilize (meaning that at a minimum the stats stop getting worse). The accumulation phase may last through 2009. So as of now, it's hard to see a real bull market starting to form earlier then the middle of next year if not in 2010.

I looked at some stocks from 1987, after the crash. And even though we never tested the lows, and it seemed like the market sloped up from that point on, it took until 1989 before we got real bases and breakouts and the market managed was able to put together a real rally.

Watching CNBC this morning, Steve Liesman was pointing out statistics and comparing them to the last two recession (90, 01). He was trying to put as much of a positive spin on it as possible, by pointing out that in most, the numbers are near or just better then they were in both those recessions. The intent was to show that the recession is mild and maybe no worse, which would imply we're near a bottom. Now assuming the market has priced in this scenario, I would ask, what happens to the market, if those stats start to make multi decade lows???? Right now, I would also reason, that the market has paused and rallied because historically the market tends to start rallying about midway into a recession. So if we assume that this recession is going to resemble the last two, then this would be the mid point of it. 3 months in the 3Q and now NOV would be the 4th month, and the last two lasted about 6 months (2Q's).

Now anything is possible, but I think that the optimism out there is based on a potentially false hope that everything will fall into place as expected historically. As we've seen and experienced so far, it has been anything but.

Hope everyone had a nice weekend.
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