Friday, the CEO of Bear Sterns, noted that his sector (which is a market leader by the way) was weathering the worst storm in 22 years. That's a bold and significant statement.
Indeed, stocks took a dump on Friday and the intermediate trend of the market is now in a heavy swoon.
We are embracing this downturn. Stocks have been under heavy distribution for months now. In fact, the market has been under steady distribution for the past two years, which explains why it has been progressively harder to make money buying stocks. This sell off, whatever it turns into, is something the market really needed in order to reset the stage for better trading.
As we mentioned last week, we don't believe we are now entering a bear market. We may see bearish conditions for a while, but the long term bull has yet to reach its final stage. This sell off may be just the ticket that kicks off that final euphoric stage. We don't know.
Right now what we know is it's best to position for lower prices and when we start to see capitulation and money flows start to diverge higher as stocks inch lower, then, and only then is it time to start thinking of buying again. Right now sell is the only game in town.
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