Once a trend is established, either up or down, it usually follows the basic law of physics that a body in motion tends to stay in motion. That was certainly the case over the past week as downward momentum accelerated and the November 08 lows were taken out with yesterday’s drubbing.
The widely watched 752 level on the S&P; 500 was violated, which means we’re back to square one in terms of looking for a new potential bottom formation. Those who engaged in the hazardous sport of bottom fishing late last year will now have to scramble for the exits to avoid further losses.
Many readers, who suggested last December that I modify the domestic trend tracking rules to allow for a faster re-entry, are hopefully getting the picture that being overeager does not always pay off—at least not in this economic environment.
Personally, I am excited about these new lows as they will bring us closer to the eventual real bottom wherever that may me. Additionally, it allows more time for our trend line to descend even further, which will present us with the opportunity to deploy our assets again at much lower prices.
The flip side is that those buy and holders still hanging on for dear life will be hurt even more as the bear market deepens and inflicts further portfolio pain. With the S&P; 500 having lost 38% in 2008, and almost 18% year-to-date, the picture for those having stayed in fully invested positions is now showing that they have reached danger territory.
Comments 5
Ulli,
I personally don’t want you to change your timing method based on what your readers want. You are the boss, not the readers. A good example is what would have happened had the U.S. government changed there method and gone ahead and tied the Social Security fund to the stock market. Ouch!!!!!!!!
T.M.
I have been a subscriber to various market timing services from time to time since about 1979 and I have noticed that anytime they start making changes to there original strategy that it isn’t long till they start to fail and lose subscribers quickly.
With reference to the current possible bottom I also am one not to try and guess bottoms because most of the time it ends up going much lower than than I had anticipated and I don’t want to experience the loss that that type of thinking usually causes.
T.M.,
Good point; unlesss they would have made it mandatory that everybody uses trend tracking… 🙂
Ulli…
And mandatory trend tracking would be a bad thing? Keep on keepin’ on, Ulli. You’re one of the few who have figured it out.
Bill
Ulli–I would like to thank you for your discipline–it really does rub off. The profits will be there when the trend changes and you will be there for it. Keep preaching it–we all need it for other things in our lives.
Sam