Monday, September 15, 2008

A Note on Today's Ugly Market

It comes as no surprise that market volatility has spiked over the dreaded 30 mark twice today—once at the open and again going into the close. If history is any indication, we can expect volatility to be high for a while which means that now is NOT a good time for risk-adverse investors to be taking on new long positions, as if I even have to mention that! But I'm getting of the mind that a bottom in the financials could be put in the next month or so, providing that the previous bottom reached on July 15th holds. Below, the weekly chart of the XLF, the Financial Spyder (read: ETF), shows that its trendline has been hit four times. Predictive chartology tells us that the chances of a stock recovering after four such dips is much greater than with only three. Of course, that doesn't mean that further declines aren't possible, but what it does mean is that we should start keeping an eye on it and research individual companies for potential winners when the group finally does turnaround.

Yes, today is indeed one of the gloomiest trading days in recent history but being a contrarian, I'm finding some cheer here that everyone seems to have thrown in the towel, for a return to the happy days of yore will not occur before we experience complete capitulation. At least that's my humble opinion.

My stomach is growling so after a lunch of cheesy cauliflower soup that Fifi's whipping up, I'll post another blog discussing today's market action on the MANDA portfolio and what actions, if any, need to taken. See 'ya in a few!

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