The Beginning

So, I had an idea, one that I was completely unfamiliar with... a blog. I don't read them, I don't know much about them, but I decided I'd start one (if it was easy) and let friends track my stock market research, thoughts, gut feelings and other random thoughts I may have on a periodic basis. Well I have random thoughts constantly but I won't subject everyone to them thru this medium. Of course, I may be the only one reading this. :-) That's fine, I type to myself quite a bit. It's therapeutic to me.

And now, here I am. Now what... Well let's dive into it. Today is Thursday Oct 16, the Dow closed just under 9,000 today after a 400 point rally. Where to from here? Tomorrow is a toss up. It's options expiration day so that alone keeps things in the unknown arena. Add to it the volatility that we've seen the past 2 weeks that has never been seen before. 700 point, 800 point, 1000 point swings in a single day. It's been amazing if not nerve wracking.

Where is the bottom? That's the question on everybody's mind. Have we seen the bottom? I'm here to say I don't think we've seen it yet and the bottom I'm seeing is between 6800 and 7000.

Let me explain something. I read a lot of articles, I read a lot of information from a lot of analysts, I read a lot of information on a lot of websites. In just the past couple of days I've read several opinions that the bottom is in and then I've read some that say Dow 5000 will be the low. I take everything I read, I research what I can that the writers reference, I do my own charting and I make prognostications of my own. For instance during the summer my target for the Dow was 8,500. That's about where it's bottomed at (8,451). So far. But now I don't think it's done. On a daily basis I go primarily with my gut when I dabble in a little daytrading. I move my retirement money when I feel strongly about a situation or see a trend forming.

On August 27, 2007 I moved all of my retirement out of the stock market when the Dow was at 13,322. I sensed a bubble, an impending disaster. As the markets peaked in October at 14,165 I thought I'd made a mistake, but finally the downturn began. It stalled in the summer and the Dow held in the 11,000 range for quite a while. I thought maybe that was it, it wasn't going to be that bad... but then September and October rolled around. So here we are, Dow 9,000. At the recent bottom the Dow was down 41%. I felt good that I'd saved myself over 30% by getting out when I did. I strayed from my discipline though and tried to time a bounce. After the market started falling in early October I started buying back in with portions of my retirement money expecting a bounce at any moment. I was too early though. With my last 25% infusion I did time it perfectly and got in the day before the 9% up day recently. I took that opportunity to pull 75% of my money back out. I left 25% in just in case there was some more upward movement. There wasn't and the market tanked once again. At the next upswing I got out. That was today. I'm now 100% out again. I did take a 10% loss on that last 25%.

I've been reading some articles particularly by pure technical chartists that tell me that the next two weeks could be very ugly. If things happen as described by some, we could see a 25% drop from where we are today taking us down to 6,800 on the Dow.

Now, technical charting isn't perfect. If it was we'd all be using the same charts and would be raking the dough in. But I've been studying the charts from the 1930's, the 1970's, 1987, the early 2000's to see what the patterns were during those recessions and bubbles. There's never just one leg down. There are at least a couple. And, when the bottom is finally found, it's always tested. Tested in the sense that the market will rally from a bottom, but eventually it comes back down to that level to see if it holds or stays above it. Sometimes its a couple of weeks later, sometimes a couple of months, sometimes it's a year later, but it always happens.

There are all sorts of technical indicators that help identify a bottom. Of course they're after the fact. You have to be able to look back to say that in fact it was a bottom. So the act of picking and hitting the bottom as it happens is pure luck... or foolishness to try. But here I am trying.

I've saved myself tens of thousands of dollars in paper losses by getting out when I did last year and I want to preserve and maximize that "savings" by getting back in at as close to the best time as possible. If in fact the 8,451 close last Friday was the bottom, I'll catch it when it comes back to test, whenever that may be. If there is another leg down (or more than one) I'll try to play the bounces in order to make a few percentage points.

As I was recently reminded, during the depression and other major downswings there are big rallies imbedded in them. That sounds good, but how do you time them? And while they're big swings, they're during the actual downturn. Down 40%, up 20%, down another 30%, up 15%, etc. I already got caught getting in too early trying to play a bounce so I'll be a bit gun shy now but it sure is tempting...

That's ok, I enjoy the reading, the researching and the guessing.

There are a lot of tools, software packages and the like out there for stock traders, but that takes the fun out of it. :-)

In future posts I'll provide information I find interesting or thoughts, gut feels that I have. I will also post my trades as I make them as I did for some of you via email the past couple of weeks. I do that so you can follow my success or failure rate. I will report my gains and losses in percentages, not dollars. This isn't about how much money I make or lose, it's about standing behind what I say and acting on my gut feelings and research.

The world, country, economy and stock market are in uncharted territory. We are witnessing history in the making. We've broken several records in the past 2 weeks in the stock market such as the biggest single day point losses and gains to the biggest point swing in a single trading day (1000 points). It's been amazing to watch. I feel the pain for those that have suffered the 40% losses in the past year. For those close to or even in retirement, this has been earth shattering to them and I can't imagine what it's been like.

I hope you find my posts interesting and maybe even educational. I'm no expert. Far from it, but I'm an enthusiastic amateur.