Hmmmmm...

Color me confused... No good news, but the markets like to move up. I've been reading about some mandatory redemptions where some large firms are being forced to liquidate some bonds and buy stocks. While I don't know the details of it, if it's true, it would explain the upward movement in stocks. Volume is so light that any steady buying would move things up.

It's a good thing nobody is actually reading this stuff that I type. :-)

The short I'm holding onto is getting nailed. Don't tell my wife that I've lost a few dollars. Maybe I'll go back and change my previous posts to say that I'm actually on the right side of the trade this week.

Nah, I'm here typing to myself to track things and learn from myself.

Lesson 1 learned 3 weeks ago... don't buy in with retirement money to try to play a bounce. Got bit on that one but not too bad and I did get back out.

Lesson 2 learned this week... Stick to your discipline (applies to lesson 1 also) Lock in gains and use trailing stops.

Doesn't look like 7773 on the Dow will be broken this week, huh? I won't even venture a guess about next week yet. This market is bi-polar and all the usual patterns, expectations, logic and common sense are out the window until things calm down.

One thing I'm sure of and that's as long as volume is only average, we haven't seen the real buying that will happen when the bottom has been found. Who knows 8154 may have been the bottom and when it's tested (which it will be) it may hold and then the real rally can begin.

We'll see what ghosts and goblins show up for the market tomorrow.

Boring Til Fed Time

Well the day was boring, reminders of the good ol' days way back before September where a typical day on Wall Street was unexciting... Then the fed announcement at 2:15. The usual lurches up and down and then another surprising rally. Most times when the announcement is exactly as expected, there's a downturn, but no, not in this day and age... A rally of around 300 points... until 3:50pm and the bottom fell out.

Some are blaming a rumor or piece of a statement by the CEO of G.E. saying their revenues would be flat in 2009. Well that wasn't what caused it, it was simple massive selling by hedge funds and other firms.

Bottom line, the Dow ended the day down about 75 points. Not too bad if that's all you knew, but the 350 point drop in the final 10 minutes was quite impressive.

And say it with me... volume was average... yep, still not big buying going on even during the big rally after the Fed announcement. Everything is being inflated up and down by mediocre volume.

I think this tells us that the path of least resistence is still down.

Let's play a little game of "Do you remember?"

Do you remember that on Oct 13 the Dow rallied up 936 points?
Do you remember that on Oct 14 the Dow was down 76 points?
Do you remember that on Oct 15 the Dow was down 734 points?

Sound familiar?
Oct 28 Dow up 879
Oct 29 Dow down 74
Oct 30 Dow....???

History doesn't necessarily repeat itself, but it does rhyme. Could tomorrow or Friday be a big down day?

Where oh where is the real bottom? Will we find out in 2008 or in 2009 or possibly not until 2010?

A New Rally?

Q: How can you tell when Iggy is short the market?
A: The premarkets are up huge

Yep, glad to see that someone up there still has a sense of humor. :-)

I may be getting out early this morning and watching to see what takes place.

Enjoy your Tuesday everyone.
=====

Wow, never in my wildest imagination would I have guessed todays action. And I can prove it... I held on all day as my short of the S&P dropped 20%!!!

I've said several times that the rallies would be big and impressive. Usually they don't happen in a single day though. Now will it hold? Sorry to say it won't. Volume was average again which means the big boys weren't buying into it. This was a relief rally and probably shorts covering their positions.

I think Ghoulish Friday is looking very possible.

Well I'm going to sulk now...

;-)

Another Attempted Rally - Another Failure

Monday started out on the downside but made an impressive attempt at a rally almost hitting 8600 on the Dow, but then it was all downhill from there as the market sold off big in the final half hour to close at 8175.

Every attempted rally is met with a total lack of enthusiasm. Volume once again was average which means people weren't jumping in during the rally, hence it fizzled as usual.

I have a feeling that tomorrow or Wednesday could be the "holy crap, get me out of this market" day. The Dow has been holding up relatively well when compared to the S&P and the Nasdaq. It's time for it to play catchup. Verizon held it up today and that won't happen again.

I'm short the S&P again, buying in this afternoon. I plan on holding for a couple of days and at some point we'll get a rally. Really, we will.

Automakers are about to be bailed out... by the Energy Department??? The gov't is pulling out all the stops to do anything and everything possible to try to slow the spiralling.

One of my favorite analysts is about to be on CNBC and I look forward to hearing what he has to say. He's been dead on about this downturn the entire way and I want to know if he see's the bottom anywhere in sight yet.

How about this tidbit... In the month of October there have been 19 trading days so far. Only 4 of them have been up. We knew it was bad, but it's hard to fathom how bad it is when you realize that only 1 day a week on average has been positive.

Bottom Callers Not Invited Back

I can't help myself, I can't hold it in any longer... If you're a guest on a stock show and you call a "bottom" and within a week or a month it's proven that it wasn't the bottom, you won't be back on television for a year. These guys and gals must be held accountable. Not even the hosts of shows are held accountable. How many times did we hear Cramer, Kudlow and numerous guests of theirs say between January and September that we were at the lows and it was a great buying opportunity? How many times in October have they called a bottom until Cramer FINALLY started talking about selling. Thanks, after the markets are down over 30% he realizes its time to sell. How many billions of dollars did people lose by listening to so called experts?

It's the analysts and guests that get to me more actually. The hosts of the shows are on for entertainment purposes primarily, the expert guests they bring on are supposed to be the ones that know what they're talking about, yet they're just there to hype their companies and bring in new business for more commissions.

This article/link below was interesting in that there are completely differing views on where P/E ratios are right now. One guest on a show says he can't believe how low they are, but that's because he had no idea that historically they really weren't. But in the past 20 years, yes they would be considered low. The next guest, the writer of the article explains that in fact P/E ratios are still historically high even after stocks have plummeted 45%.

I admit, I get swept up at times when I see some of these talking heads claiming that the bottom is here, the corner is about to be turned, valuations are low, we're oversold, etc, etc... but then I read something with some real meat to it, some solid analysis and history and I realize that the bubble we've been in for at least the last 10 years was far bigger than I ever imagined.

We have a long way to go. We have a lot more deleveraging to go. Valuations are not at reasonable levels yet. Yes, many stocks are 50% off their highs, but based on what the real economy will be like for the next 5 years, they're still over priced.

We're going to have one heck of a rally within the next 3 months. I don't know when, but it'll feel good and people will jump into it thinking the worst is over, but they'll be wrong.

We may not see the TRUE bottom until the spring.

We have a lot of margin calls, hedge fund bankruptcies, foreclosures, unemployment, business closings and overall angst to go.

I'm not claiming this will be the end of the world, but we haven't seen anything like this before and its become a global issue.

Do you think Americans know what it's like to live within their means? To save up for something they want to buy? (KMart is advertising Layaway!!) To live without using their home as an ATM machine? It's going to be painful for a lot of people. Folks like us (and I'm speaking about most of my friends that may be reading this), we'll be fine for the most part. We're getting hurt though by the decline in stocks, retirement accounts, etc. but none of us will be losing our homes. We're a frugal group overall.

I hate that all of this is happening, but it's very necessary and it's going to be very difficult for a lot of people for a long time to come.

If the Dow does in fact get down to 5000 that will mean it'll need to almost triple to get back to where it was... As it is now we're almost to the point it'll need to double. That'll be bad enough if we can keep from dipping much lower.

Here's the article of the day to read: http://www.marketwatch.com/news/story/valuations-low-only-if-you/story.aspx?guid=%7B6071ABC4%2D8568%2D4529%2D8A87%2DE182268CE13E%7D

And on a sad note... today was the last day of the State Fair... I had my last elephant ear and my last italian sausage of the year today for a full 51 weeks...

Black October

Historically we've had Black Thursday, Black Monday, Black Tuesday... How about Black October? This slow ripping off of the bandaid we've endured since the beginning of the month is definitely worthy of this moniker.

Depending on how things end up next Friday, this could be a 20%, 25%, 30% decline in a single month. If we have a final plunge on Friday, we'll have to call it Ghoulish October.

The current record for worst months on the Dow are:
Sep 1931 -30.70%
Apr 1932 -23.68%
Mar 1938 -23.67%
Oct 1987 -23.22%

As of right now this month is the fifth worst at -22.78%.

A noted economist, Nouriel Roubini who I may have mentioned in previous posts was one of the first ones to shout warnings about this disaster we're in. He started in 2006 and people thought he was a crackpot. Of course as it turned out he has been dead on right. He laid out exactly what would happen and in what order. Check out this article from February, it's pretty eerie in how accurate he was.

http://www.cnn.com/2008/US/02/28/beck.commentary/index.html

Well he of course has been making his rounds on the stock channels and was on Bloomberg yesterday I believe where he said we still have up to another 40% decline from here (that would be Dow 5000). He also thinks things could get bad enough to have to shut the markets down for a week or two to try to stop a true panic scare. Let's hope this doesn't happen because that would be disasterous. He maintains a website called the RGE Monitor. Some of the information is only available if you're a paid member. I don't pay for anything, I'm cheap, but I do read the free stuff on his site.

I also recommend a guy named Gary Kaltbaum, he has a pay service also, but he does post once or twice a week for free. http://www.garyk.com/

If you're into learning, I highly recommend http://www.minyanville.com/

And here is a very interesting article. It's lengthy but very worth reading.
http://www.minyanville.com/articles/WMT-TGT-bailout-RAD-recession-deflation/index/a/19691

Black Friday - Is it here?

This is it kids... Black Friday. The futures are down the maximum amount they can be. Circuit breakers have kicked in. It's 7:00am and things are looking very bad. Asian markets were down almost 10% overnight. Look for a similar 10% correction this morning. After that I don't know what to expect. It'll be volatile to say the least. The question is, will this be the bottom and bounce day or will it continue into Monday. Hang on to your hats.
=====
Well there's one hour left in the trading day, I'm at the DFW airport... I made some money on my SDS stock that shorts the S&P. Will there be a rally into the final hour or a drop? Flip a coin.

Overall, the "crash of 2008" didn't materialize... yet. Next week is the week apparently. One day or multiple days we will dip below 7773 on the Dow.

I'll recap the closing hour after I get home.
=====
And the final numbers had us down 3.5% across the board. A bad day, but not the disaster that it was thought we'd have based on the futures this morning when the talking heads on TV had us crashing.

More imporantly though is we established new lows on the Dow, S&P and Nasdaq. We continue drifting down. It's painful in that it's 3% here, 5% there... rather than ripping the bandaid off with a 23% quick drop (which is how far we've dropped just in October), we're peeling the bandage off ever so slowly. So when do we finish? Hard to tell. The first support level on the S&P is at 840 and that one is almost certain to fail, next is 777 and then 600. We're at 876 right now. 777 would be a 12% drop from here and 600 would be a 32% drop from here.

777 would also mark a 50% drop from the peak last October. Which means to get back what you lost would require a 100% increase. At 8% a year you're looking at 9 years compounded annually. We won't even talk about the scenario of S&P at 600.

I keep thinking about when I'll get back in, but I don't want to be too early. I already tried playing a bounce and got burned and I don't want to do that again. Fortunately I bit the bullet and sold for a small loss rather than holding on and hoping to reclaim.

I'll get in once there is some confirmation. There are signals, signs, patterns that mark a true buying point. I may miss a small amount while those signals start blinking during the rebound but I'd rather be too late than too early. I want to be the second mouse.

There are a couple of news items next week that could swing the markets and no telling what our wonderful government will pull out of it's hat next so every day is an adventure.

Enjoy the weekend and I'll post anything I come across.

Sobering...

A story I read at lunch today...

http://www.minyanville.com/articles/S-P-dollar-market-stock-Japan/index/a/19666

=====================

Wheeeeeee… what a rollercoaster today, huh? Another one of those wild rides and this one left things all mixed up. The Dow has been outperforming the Nasdaq and S&P for a few days now by going up more on good days and going down less on bad days. Whether that’s good or bad is up for debate. When the only thing doing “well” are the large caps, that’s not usually good, but hey we’ll take any good news right now.
The Nasdaq and Russell2k set new lows again today.

The Dow had a 550 point range today from peak to trough. The final hour rally looked pretty good but will it be good enough to follow through tomorrow.

Microsoft released earnings after the bell and they weren’t horrible. Their forward guidance again wasn’t dismal like some others. The stock is just kind of floating around after hours waiting for direction.

I’m still convinced that we’ll see the Dow dip below 7773 and the S&P will approach 777 possibly. I bought a stock today that mimics the S&P but in reverse. It’s called the Proshares Ultra Short. Not only does it move in opposite fashion as the S&P but it moves at 2x the movement. So if the S&P is down 2% this is up 4%. The ticker is SDS. It’s fun to watch because it moves a LOT. It went from $99 a share to $112 today before coming back down to $100 at the close due to the rally.

I plan on holding on to it to play this final downdraft that will come between now and next Friday.

If things play out as I expect, I’ll move my retirement money back into the market. My own Trick or Treat…

Timberrrrrrr

Today is shaping up to be one of those major ugly days I've been waiting for. Futures are down sizably at 7:30am meaning a lower open. I'll report back at the end of the day of the actual results.

====
Wow, ugly was right when I posted my quick comment this morning. A friend emailed me at 10:30 this morning when the Dow was down 369 and his guess was that we’d end the day +5. I replied right back to him and said we’d close down 500. I was off by 15 ;-) Of course it was just a lucky guess but I didn’t think today was going to be one of those rebound days. However, we did rebound about 150 off the bottom that was hit in the final half hour. So that does give a little bit of hope for tomorrow. However (part deux), the Nasdaq and the S&P both hit new lows today below their previously low close on Oct 9. Lower lows is never a good thing. The Dow kept its head barely above that old low close. Amazon reported earnings after the bell and their forward guidance was bad, they’re down 15% in the after market.

What about volume Scott? Well I’m glad you asked… volume once again was average. What’s this mean? People still aren’t scared enough to bail out. Until we have one or two OH SHIT! Days, this downturn is not over.

Now there are articles and headlines all over the place about the recession, how long it’ll last, how deep it’ll be… It’s about time. The cheerleaders on the TV (CNBC in particular) have been in denial about a recession until the past couple of weeks. How many untold billions of dollars have people lost by listening to them? Drives me insane.

Where to from here? Well my target of 7000 is still looking viable. I read an article by someone saying we’d see 7200 within 6 weeks which was the 2003 low. Taking it all with a grain of salt and doing my own due diligence, but I do like hearing and reading what others are predicting.
One thing I do know (maybe, kinda) is that the Dow will go below 7773 intraday by the end of next week. Remember that theory I told you about that I was trying to get my brain wrapped around? Well it’s falling into place very nicely. It’s based on 9 week cycles and this is week 8. If the Dow dips below 7773 this week or next, the wheels will be in motion for a buy signal (13 weeks later). I’ll keep watching it and will report my findings.

In the meantime I’m afraid we’re not going up any time soon, at least not in a big way. It’s amazing how many solid company stocks are down 50% or more. Some tremendous long term opportunities will be out there once the bottom is finally found… even if the bottom doesn’t come until the first half of 2009 as some analysts are now predicting.

A Down Day - What a Shock

Up 4% yesterday, down almost 3% today (Nasdaq down 4%)... it's becoming a pattern as of late. Over the past week, every other day up, every other day down. But is it 2 steps forward and 1 step back? There are arguments that we're creeping upwards. There are arguments that we're barely holding on before a downdraft.

Volume was average again which says nobody was running for the hills just as the low volume yesterday meant that there wasn't a rabid need to buy.

Are we in a trading range? Could things calm down a little bit from the volatile nature of things the past month?

As soon as I begin to wonder if maybe it's time to get back in, that upward movement is happening that I realize that we're only 6% from the bottom set on Oct 9. If that were the true bottom we'd have bounced harder. Yes we'll have some rallies, bear market rallies, some will be impressive but I'm not willing to jump in right now. I like the saying "the second mouse gets the cheese". I don't want to be the first mouse.

I'm trying to be patient, I'm trying to keep things in perspective. Primarily, the economy stinks. We haven't even scratched the surface as to the affects on the general population at this point. There is a laundry list of ripple effects we'll see over the next several months. Just today alone I've read news article about retailers that will be going bankrupt, car dealerships that will be going bankrupt, cities and states that are having to cut back due to reduced incoming revenue. I don't think we're within 6 months of the bottom of this. I'll just wait. I don't care how much cheerleading I watch on TV, how many "this is the bottom, time to buy" statements I hear... basically because the ones saying its time to buy are the brokerage houses that want the commissions!

Also it needs to be noted that we're in the middle of 3rd quarter earnings releases and they're coming in mixed. But the overall theme from virtually every one I've read is that forward guidance is very weak. The reason some 3rd quarter earnings look decent is that the 3rd quarter ended Sept 30. The Dow was right around 11,000. The plunge started on Oct 2.

I'd love to be able to play some of these bounces but I have to be careful with my retirement accounts. I'm sure they have limitations as to how many "trades" I can make. I need to call and ask them actually so I don't get myself in a bind not being able to do what I want to do when the time comes.

Just Another Bear Market Rally

Yesterday was likely a typical bear market rally. They can look great, they can last a few days, even weeks, but they aren't a true bull run. As corporate earnings continue to be released before the bell and after the bell each day the markets will jump around. A couple of good reports but then a slew of bad ones. It's not so much the actual earnings that matter but it's the guidance for Q4 and beyond that are looking rather weak.

Keep an eye on things, enjoy the rallies, but don't be surprised by the reversals. There simply isn't anything "great" that could turn the markets around for real. We're in an economic downturn, a global one. We have to go through it, it's that simple.

Today is a key day for more of Lehmans credit default swaps going up for auction. And I think there are some of Fannie Mae and Freddie Macs that will be coming up later this week if I'm not mistaken.

A Good Start to the Week

If anyone is actually reading this and would be interested in discussing points of view I'd really appreciate it. Email me. The articles I posted below saying Nasdaq 1108 and Dow 5000 have me REALLY wondering and thinking.

Stock futures are up overnight signalling a good start to the trading day. It's only 6am, but it's a good sign. I'll be in the air on the way to DFW when the market opens and I look forward to seeing how things actually start and if any rally can hold.

Here's an interesting article I read this morning. A paradigm shift for the average American.

http://www.bloomberg.com/apps/news?pid=20601109&sid=axsUMrc.liiE&refer=home

====

Just arrived in Ft. Worth. Saw these 3 articles and had to share... Nasdaq 1108??? Dow 5000? And the other link is one of an analyst I follow any time he posts.

http://www.cnbc.com/id/27275912

http://www.cnbc.com/id/27277635

http://www.garyk.com/

====
The day ended on a high note, quite impressive almost 5% up. However, let me put a damper on it though with the fact that overall volume was unimpressive. Average at best. That means there wasn't a mad rush to get back in by the big boys.

Then, after the close were some sizable company quarterly earnings. On the good news was American Express. It beat lowered expectations and jumped 6% after the bell. The damper on that is that AmEx was at it's 52 week low last week. On the bad news, Texas Instrumemts missed it's lowered expectation and says the 4th quarter looks rough.

Bottom line, the rally today was a relief rally and wasn't based on any fundamentals. I wish I'd kept that last 25% I had in for an extra couple of days, but oh well. I'll wait for another opportunity which I think will come soon.

I'm not saying rallies won't continue, I just think they won't stick and we'll backslide as more earnings come out and forward projections look weak.

There's a lot going on out there and you never know what will cause a spike or a plummet. If the market can move up on the bad earnings news tonight and whatever may show up in the morning, that may show that a bottom of some sort is in.

Ponderings

Where to from here?

There is so much to take into account when trying to guess where things are headed over the next week, month, year. It’s truly dizzying. It’s so easy to over analyze. Trust me, I do it all the time. I’ll convince myself of one thing only to find an argument for the opposite side.

Let’s break it down. First of all the stock market is forward looking. Six months into the future actually. News and information today is viewed as “what is the impact in six months”. For instance the housing downturn. Home prices are down roughly 20% and every month we read that the new numbers are showing a further decrease… but, how the markets are looking at that is “has the decrease decreased?”. Meaning, has the rate of decrease slowed. Instead of being 8% lower than a year ago, are prices only 7% lower year over year this month? Will the bottom be set in 6 months? So, while bad news keeps rolling in, it’s a question of is that bad news less or worse than last month? The markets don’t wait for home prices to actually start moving up, they anticipate it half a year in advance. It’s a gamble, the tick up in home prices for instance may be a temporary anomaly due to buyers of homes thinking the sinking prices are bargains when in fact they were too early to the party. Again, over analysis is so easy to do. Sometimes you have to come up with your own theory and stick to it.

I had marked Dow 8,500 as the low back when it was at 11,000 over the summer. I had come to that number based on analysis and charts (not astrological charts). The current closing bottom is 8,451 as of last Friday. Should I stick to my guns and do what I said I would do and dive back in? Or, as I’ve done, I’ve revised my estimates and think that 7,000 will be the low. Am I over analyzing? Am I over thinking? Am I second guessing myself because we’re here now? I don’t know the answer. Yet. I don’t want to miss the bottom, but I also don’t want to be too early to the party. If there is another 20% decline from here I want to wait for it. If/when we hit 7,000 will I then say that 6,000 is on the way? I try not to get swept up in the emotions of the present day. I prefer to think that I continue to do my research and am making informed new decisions. But is that really possible? That’s why I like technical charting methodologies, they’re emotionless. Show me some numbers to crunch, some patterns to compare and project out and I’ll trust that. But… it was my gut that got me out in August 2007, not charts.

The thinking I have right now is that today is risky. There is more downside risk than upside potential. Right now the path of least resistance is down. Other than a sigh of relief rally, what is fundamentally out there that could justify a modest move upwards that could be sustained?

After the next two weeks if we haven’t hit new lows the overall environment will be a little more stable and little less risky and I’ll feel more comfortable being in even if it’s at slightly higher levels.

Looking at the charts I posted yesterday I have to remind myself that things don’t happen in two weeks. Sometimes it’s a year. Heck, some are saying that the 2001 – 2007 bull market was nothing more than a sucker rally from the bursting of the dot com bubble! Now that’s one amazing sucker rally.

And coming full circle… Where to from here? I look forward to finding out. OK, time to head to the State Fair and forget about the end of civilization as we know it. I’m hungry.

Charts and more charts

Above are Dow charts from the 1970's recession, the 1987 crash and the 2001 recession (click on them to enlarge them). When looking at the 2001-2003 timeframe we had a major downturn, rebounded about 25% and went lower a year later before the bull run that just ended last year. The 1987 crash did have a relatively quick rebound, but it still took 2 months for the real test of the bottom. The 1970's recession had a 20% drop in late 1973, a mild rebound of 10% before a 30% downdraft and then notice the test of that bottom was 2 months later.

These types of events don't fix themselves within a given week. We've gotten so used to V shaped bottoms and quick rebounds on short term weakness that we expect it all the time now. We're in for what could be a deep recession in my opinion. There are too many economical problems to be fixed and run through quickly. Once we do find the true bottom we'll bounce nicely but then I believe we'll be stuck in a trading range for at least a couple of years.

One quote I read on a site that I like says "History doesn't always repeat itself, but it does rhyme." So that's why I'm supplying the charts from previous troubled times. We won't see an identical pattern, but by knowing what has happened in the past we can be ready for what could happen in the near future.

So, what if we do have a strong rebound right away? Great, but that tells me we haven't hit the true bottom. It's nothing but a sucker rally, otherwise known as a dead cat bounce (familiar with that term? In essence it's a saying related to the fact that even if you drop a dead cat it'll bounce a little bit). Some rallies last a while, some only last a couple of days. The 11%, 936 point rally we had this past Monday was one. It was a relief rally. We'd dropped 20% in short order, we were due, and we got it, but then it didn't build on itself, there wasn't any more juice to take things higher for even another day. 9000 seemed to be a resistance level, we couldn't close above it yesterday.

I'm watching out for anything and everything. Playing devils advocate with myself, the fact that we dipped down intra-day to the 8200 level on Wednesday and bounced means that's a possible support level and it was higher than the 7900 intra-day low we hit last Friday, the low point of all this.

In essence you can drive yourself crazy looking at both sides of things and what it boils down to sometimes is stepping back, looking at the big picture, using your gut, some common sense and saying "what's really going on in the economy, the country and the world".

I've found a charting method that intrigues me. I'm having a little trouble getting my head wrapped around how it works. If I can get my pea brain to grasp it I'll follow it for a while and see if it's worth explaining.

Fun With Numbers

In my first post I rattled off some numbers. I use the Dow as the basis for the numbers here. In truth, the S&P is the better basis to use, but the Dow is more widely used by the media.

Dow peak - October 2007 - 14,165
Dow low - October 2008 - 8,451
Total drop 40.34% from peak to trough
The "average" bear market is 30%

In just October the Dow is down roughly 20%. So, the bad news is that no matter how ugly your last quarterly 401k statement looked that ended on Sept 30, the numbers are even worse now.

If my estimate of Dow 7,000 does come, we're looking at roughly a 50% haircut.

Now, here's some sobering information. In Nov 1998 the Dow was at 9000. That's right, in 10 years the Dow has gone nowhere. Anything you had back then is worth the same today (actually worth less when you take into account inflation). And any new money you've been putting in over the past 10 years has been at higher levels, therefore all of that has actually lost money. I don't say this to sway anyone away from investing, but I say it to get you to think a little bit. The typical "buy and hold" does work over the long haul, but there's nothing wrong with being active with your investments. I'll explain further later... the markets just opened and I want to see how things look...

===

I'm back. I'm at my home away from home away from home... the DFW airport. A little time to kill before boarding starts.

The markets headed down early and have bounced back nicely. At one point up about 250 points, now up 150. Which way will we swing this afternoon... round and round she goes, where she stops nobody knows.

As I mentioned I read as much as I can, get as much input as I can, listen to all the analysts, do my own thing and I mix it all together and come up with my own game plan. Maybe my original target of 8500 was the right one and I'm pushing it by saying we have more downward motion to go. If I'm right, great. If I'm wrong, I'll learn from it.

Alright, no rambling, the Dow is up 112 right now at 2:40pm eastern time. My plane takes off 10 minutes before the markets close so I'll miss the final few minutes. I can't wait to land to see what the closing bell says.

=========
And now I'm home.

The good news, the Dow was up 4% this week, the biggest weekly gain in 5 years.

The bad news, the Dow was "only" up 4% after a 20% straight drop in October.

I see this as weakness I'm afraid. After the huge rally on Monday of over 900 points, over half was given back by the end of the week in a very whipsaw fashion.

The next two weeks could be pivotal according to one chartists theory. If we survive without a crash we'll be safe for about 2 months I think. Then we worry all over again.

Please note, I'm not a total bear or pessimist, I'm simply being realistic about the current state of the economy and the market. I'll explain what I'm seeing and feeling.

I have made a lot of notes to myself about things to blog about which I'll start on over the weekend when I'm not eating sausages and elephant ears at the fair.

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Just came across this very good article.

http://biz.yahoo.com/etfguide/081017/65_id.html?.v=1

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.