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Friday, November 14, 2008

Market Bottom is in, buy everything in sight!

That's what you will start hearing, next week, next month, heck into beginning of next year.
And they are right, for the next 1 to 5 months or so.

But the market bottom is NOT in. NOTHING has changed fundamentally, and many bloggers I read daily and I don't believe it is.
But near term, today the market went right through the bottom level Thursday, I have been warning about, and it rallied hard higher, ending much higher. This will likely result in a 1-5 month bull run. See chart on right.

Gary of the blog "Smart Money Tracker" put it best in quote below. Once again, I can't recommend highly enough fork out the cash and buy Gary's email subscription. He does best market analysis with no axe to grind or agenda. Gary's email has illustrative charts and more explaination than the email quote below:

"But have we seen the final low of the bear market? I suspect that if this reversal holds and we do move higher at some point almost everyone will think we saw the final bottom. However because of the extreme left translation of this 4 year cycle, which I've gone over numerous times, I doubt that this will be anything other than the rally that separates the first phase of the bear from the second phase.

The bear will now need to convince everyone that the worst is over if this decline is too continue, and I think it will continue. It's going to take a lot more than 1 or 2 months of gains to shake off what we just went through. As I've said before I fully expect this rally to move back above the 200 DMA and I would be really surprised if it doesn't last at least 3-5 months. It's going to take a move like that to heal the wounds the market just dealt to investors. And those wounds must be healed in order for the second phase of the bear to begin. We need to see investor confidence restored so that when the second phase does start investors will hold on to their stocks all the way down into the very bottom of what will probably be one of the worst if not the worst bear market in history.

I suspect the next phase will be characterized by two years of declines followed by bear market rally followed by more declines and more rallies. It's been said that dumb money got killed in the crash of 29. Smart money lost in the decline from Feb. 1930 till 32. The reason being is too many investors tried to call the bottom too early. It's going to happen again. Everyone is going to try to call bottom after bottom and no one is going to have any concept of just how far down this bear will ultimately go before it's over. I expect we will see the Dow at 2000-3000 before this is finally over."

Gary's gotta get some optimism, DOW 2,000? Wow, and I thought I am a pessimist (realist?).
With the exception of even thinking DOW 2,000, I am in full agreement to Gary's view. And quibling over DOW 2,000 vs DOW 6,000 misses the point, the bottom is not in for long term investing. I refer you to my link to the right on "When to Buy Stocks or get out of the market"

So if you want to roll dice, and buy back in for a few months, seek professional investment advice. I'm a computer geek with a hobby of trading, not a professional advisor.

But it is a good time to consider diversifying out of the Federal Bonds I have been advising to purchase the last year or so, now that the major storm may have passed (for now).

Items I am long are GDX, UWM, UNG, USO, GLD, OIH, & Shorting TLT (bought puts), and a dozen gold miner stocks.
Some I'll hold for a week, some I'll hold for 5 months.
For some entertainment here is Kayne West's Gold Digger, since I have turned into a gold bug big time today.

I'll create a blog summarizing all the news between Thursday through Saturday on Saturday's post. Good luck out there, and if the market pulls back tomorrow, a great chance to get long.

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