26 APR 2009, Sunday

1. As you'll see in the paragraphs below, I wouldn't be buying (ie, putting new money to work) at these levels. As per my previous email to you folks (and the videos included there...13 APR 2009), the SP500 can still go up some but it has gotten stretched for now. So, back to wait & watch mode. But I've got to believe that upcoming solid multi-week downswings become of more interest simply due to: 1) extent of price damage and 2) time length of this bear market to date. Just have to watch how it shapes up. So far, in this bear market, every down swing has gone lower than the previous downswing and that pattern will first weaken and eventually end...it will! As we move forward, during solid multi-week downswings ahead, investment opportunities may begin to become safer than what has been seen thus far. Now, on to some points as to why I wouldn't be buying at these levels.
2. Beware Insider Selling! Company leaders are selling 8 times as much stock as they are buying. The current level of insider buying is the lowest in 17 years. If this was the beginning of a new bull market, you'd think they'd be buying stock hand over fist especially at these distressed levels compared to 2007/2008. No? This may be a classic case of “watch what they do, not what they say . . . ” Here's some charts on it.
3. "Things that make me go Hmm...": Is the market about to get another wedgie? Dunno...but I'm aware of it having happened multiple times since way back into 2007 (Nov 08 to Jan 09 can be considered a sloppy one). Just look at it...the 2-3 month rising wedge pattern has been fatal everytime. The rising wedge is basically indicative of "Da Boyz" pumping it up really fast, which gets the little guy all excited to buy...then all of a sudden the up move becomes very choppy / labored rising only slightly as "Da Boyz" sell into the now buying little guys. Once the buying by the little guys is spent, down she goes for the next leg. Just the way the game has been played this past 2 years now as you can see...and DEFINITELY demonstrates why rising markets can be traps.
4. SEASONAL WARNING: Be careful out there! Especially, as we approach the poor investment time of year (May - September). Ever hear of "Sell in May and go away"? It's an old Wall Street saying that is based somewhat in fact. Don't believe it? I posted monthly results in a previous post (3 APR 2009, Friday). Go to the blog archives in the side bar and click on it to check out the historical monthly results. This is especially a good warning as we just happen to be going into this timeframe in an overbought manner...and with a possible wedgie coming on top of that?
5. You're really not missing anything folks. Do you honestly believe that with things as bad as they are, that the economy is going to turn on a dime? It just doesn't work that way. (Look at prior blog posts). Things aren't going down as fast as they were...but they are still going down. We've yet to truly stabilize. You're not missing anything! So, please, don't get anxious about all the "buy, buy, buy" you're hearing on television or the bullshirt recent "record bank earnings" which were all accounting gimmicks (or why would they need bailing out). The investment public is being played / enticed by "Da Boyz" because they need "bagholders". Remember, it appears the insiders are selling at the very least and there is also a rising wedge forming...looks like selling to me.
6. I'll leave you with this thought that, perhaps, will help you understand better...a car salesman only gets paid when he sells you a car, a real estate agent only gets paid when he sells you a house, and a stock broker only gets paid when he sells you some stocks. Do you honestly think that anyone of those salesman will ever tell you that it's not a good time to buy what they are selling??? Ever? Is it your interests that they have in mind? For real? Answer those questions and I think you have just taken one great big giant step toward understanding the markets...buy at wholesale not retail!
7. "So, what do I look for Steve? When do I know that we're hitting a better area for buys?" Glad you asked! In the side bar, click the SP500 2 Yr Daily & the SP500 3 Yr Weekly charts. Look at them. Look for the price lows of the swings. Then compare those points to the indicators in the bottom panels. Hopefully, that helps some. If not, drop an email or call. Simple enough.