Friday, November 21, 2008
Moment of Truth is here
The market collapsed down to the "danger" level of DOW 7,552. I fully expect between now and Monday we may end even lower, but hopefully end 100 to 200 points lower, not another 400 point day. In any event, now is the time the market sorts the men from the little boys, and who can hang in there for the rebound. Or possibly the insanely stupid for staying in the market during a market collapse.
The market is down to April 1997 level! This means every dollar put into the market after 1997, on average lost value. Wow, 11 years of gains wiped out. As the chart above shows, if we do collapse, it will go back to 1994. Maybe this will finally dispel the myth that leaving your hard earned cash in the market for the "long term" isn't a good idea after all.
Of course, the question always is, must there be a rebound? In the history of stock market, yes, there is always a rebound. But who knows, maybe this time its different, but I doubt it.
The crux of the issue is, do we see all out collapse like never seen before. It's quite possible, but not probable. If the market stops dropping 400 points a day, to me that's a possible bottoming out. If the market does bottom, the rally will be something to see.
So it is down to fear vs greed, the US and possibly the world is on the cusp of a financial reckoning beyond imagination. Lets just hope we don't see a new event in modern history, and instead the US see's a rebound in the marketplace.
If you are still in cash, you can wait to see a big rally day and then start to get in, may be smarter than trying to catch a falling knife. But if you bought some today, set a threshold of pain and get out of dodge once crossed. It's better than watching the red flow from the screen. At this magnitude of destruction, the only news that matters is at world government level or top international companies. Other companies really don't matter, now its a general panic that is the issue.
The US government asks for financial help from oil states, to the tune of 300 billion dollars.
SEC calls meeting of world regulators on crisis, possible short ban
Citigroup considering selling itself My Spin: who the heck got the cash to buy them?
Jobless claims hit 16 year high
In any event, keep your fingers crossed and lets see what happens in the next two days.
NOTE: GDX has held up quite well through this, but OIH was crushed. I hope no one had it, except me.