Monthly Archives: September 2008

Sit Tight

30
Sep 08
Monday’s record point drop in the Dow Jones Industrial Average, and largest percentage drop in 21 years, is one of those outlier events that people will talk about for years. The VIX Fear & Greed Index spiked to 46.72, a record high and a clear sign of panic. But remember that we were in a similar situation in the summer of 2002 and again in early 2003, with the VIX soaring and the markets in the throes of a true panic. Those were just the latest couple of examples, and each time this happens the smart thing to do was...

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Time to Play Contrarian

18
Sep 08
With the U.S. financial system seeming to fall apart all around us and the Dow collapsing 400 to 500 points in a single day, everyone is worried about his or her portfolio. That’s natural — in yesterday’s decline alone, about $700 billion in market value vanished. But I’ve been in the investment business for over 38 years. I’ve seen this before — in 1970, 1982, 1987, 1990 and 2001. And my advice to you is exactly the same as Warren Buffett’s would be. 1. Don’t sell. Don’t let the TV talking heads and short sellers panic you into selling after...

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S&P 500 Breaks 1180 Support – What Next?

17
Sep 08
In Monday’s Flash Alert after the close, I said: “Investors seemed most worried about the lack of a solution for the problems at insurer AIG, although both Washington Mutual and Wachovia Bank also have people worried. But that’s it for the poster children of the credit implosion. With Merrill Lynch being taken over by Bank of America and Lehman headed for liquidation, getting AIG, WaMu and Wachovia resolved should not take long.” Last night’s $85 billion taxpayer-financed bailout of AIG resolved that one. Rumors are rife that WaMu has to find a buyer by Friday, or the FDIC will take...

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Dow Down Over 500 Points – S&P 500 Closes Below 1200 – What Next?

15
Sep 08
The dramatic drop in the stock market in the last 15 minutes of trading on Monday started when the 1210 support level on the S&P 500 gave way, and the prior spike low at 1200 was undercut. Although the news that Lehman Brothers filed for the biggest bankruptcy ever in terms of assets had the market down all day, it was just part of the ongoing congestion until 1210 was broken. If the S&P can quickly claw its way back over 1210 on Tuesday, we should see a fast run back to 1280 or more as a slingshot move off...

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Aversion to Risk Impacts Stocks

11
Sep 08
After getting a look at July and August, this week Texas Instruments held its mid-quarter update conference call. The company tightened its guidance range while leaving the midpoint unchanged, which is to say their business is developing exactly as expected in spite of recent rumors that cell phones are weakening. Intel doesn’t hold these calls anymore, and most of the analysts on the Texas Instruments call follow the cellular industry, so they don’t normally ask about personal computers. But TI still sells a lot of chips into the personal computer market, and one analyst did ask how things are going...

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Wait for the Coming Rally

04
Sep 08
We’re caught in a trap/We can’t get out…. I’m not channeling The King this week; I’m just looking at a market that has been in a long consolidation off the July bottom. Every failed advance and every aborted decline is simply adding to the congestion and increasing the available energy for the next leg, up or down. This long volatile-but-sideways pattern has established clear breakout and breakdown points on the S&P 500 at 1302 and 1235. That’s an awfully wide range, but it is what it is, and from the way the day traders and swing traders are moaning, Mr....

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