Tuesday, June 16, 2009

Is the Next Leg Down?

The market had its second triple-digit-down day.  After a 40% up move, the natural question is if the market is headed down from here.

I've been waiting for the market to start a correction for a while now and have thus far been wrong.  So I am hesitant to say that the next moves will be significantly down from here.  I have thought the market ran too far up 10% ago and have been consistently wrong so no reason to listen to me here.  But for me, the market just didn't make any sense where it had gotten to.  We hid the mid 600's at the market low and then bounced back up to 950.  If the market had only come back part of that way, say 800, then I would feel much better about the whole thing.  But oh how we soon forget.  Seems everybody is talking about the economic recovery.  Most of that commentary points to the market running up so much in so short of time.

But oh how people forget.  At the end of last year, we ran up from the November lows to a pretty nice "recovery" in December and January.  No sooner did everybody think the market had recovered did we turn around and hit the March lows.  Not sure we will go back to the March lows, but I definitely think we could see the 700's again and see it very quickly.   If the market opens up lower from here, under 900, I think there is a good chance that this little bear market rally is over and the next leg is down.  That doesn't mean I think you should short everything in sight.  In fact, you might want to take the time to eye a few stocks and start picking out the things you hvae wanted but didn't buy the last time we hit the market lows.

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