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How I know that the markets have hit a bottom

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October 13, 2008 – Comments (10)

I think that the markets have finally bottomed out and are poised to bounce back a little over the next several months. Want to know how I figured this out? Here's my secret. I have been absolutely swamped with work, a three week old baby, getting the flu, being hospitalized for dehydration, being the best man in my brother's wedding, etc... for the last several weeks.

Last night I finally had a chance to sit down and look for bargains out there. I placed limit orders at Friday's close for four stocks, determined not to chase them in this sort of environment. I wake up this morning and futures are up massively. You all can thank me for putting a stop to this terrible carnage. If you would like to give me a token of your appreciation, accept beer as payment.

Deej

10 Comments – Post Your Own

#1) On October 13, 2008 at 7:51 AM, Richthofen80 (90.31) wrote:

The governments of the world have taken major steps to attempt to provide 'liquidity' to the market. Those effects will be felt in the next few months. However, it will not save every bank, every company, and we'll start to see the consumer side of things soon. Therefore, we'll see a short term uptick (maybe 2 to 4 months, like what we had with financials this summer), but then we'll see a downside after Q4 earnings to even lower lows.

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#2) On October 13, 2008 at 9:45 AM, TMFDeej (99.27) wrote:

I completely agree, Rich.  That's why I'm not chasing things.  I'm determined to let the market come to me and I am leaving my limit orders as is, not raising them.  They can sit there and mark the bottom forever as far as I'm concerned.

Deej

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#3) On October 13, 2008 at 10:04 AM, Gemini846 (54.34) wrote:

Do you think it's too early to Red thumb ultrashorts? I went ahead and red thumbed SKF because I think the fed is basically determined to print money and buy shares. The US Gov has become a hedge fund? While I know they can screw this up, this could be thier chance to erase some of this bad debt.

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#4) On October 13, 2008 at 10:29 AM, rudolphsteiner (< 20) wrote:

beer, as the elixir of life, will be in great demand over the coming year. Sounds like you deserve some.

If you've succeeded in pushing the market up far enough I'll pick up the smattering of ultrashorts I sold Friday. Thanks for that.

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#5) On October 13, 2008 at 11:48 AM, Tastylunch (29.35) wrote:

Ah wondered where you've been Deej, you are normally so prolific.

Well glad you are feeling better  and it's ncie to have you back.

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#6) On October 13, 2008 at 12:42 PM, LonnieLewison (< 20) wrote:

Hello Deej,

Came across your posting and an article came to my mind from a newsletter that I read daily.

You wrote that you think the markets have finally bottomed out and are poised to bounce back a little over the next several months.

The article I am refering to is, "Is This Another Black October?" by Chris Rowe. He agrees with you on the bounce back pointing out that according to the "Stock Trader's Almanac" in the last two worst performing September's, October reversed most of the losses in both cases. So it's very likely that this could happen now. But, he also stated a very important point, which was "There is almost ALWAYS a second or third bottom made at or near the same level as the first."

The point is that it's very risky to participate in this first rally. There will be another chance to take advantage of a second rally with a smaller risk/reward ratio.

In case you want to check out the whole article, here is the link:http://tycoonreport.tycoonresearch.com/articles/666337976/is-this-another-black-october Report this comment
#7) On October 13, 2008 at 1:19 PM, TMFDeej (99.27) wrote:

Thanks everyone.

I am still very active on the Fool message boards as a Global Gains stoller and I am still actively playing CAPS, but with so much on my plate something had to give for a little while and blogging was it, given the fact that it pays nothing :).

I absolutely am not chasing this rally.  I'm keeping the four limit orders that I placed live and believe that there is a good chance that they will all fill before this is all said and done.  While I cannot talk specific names, I will give you an idea of what I have been sniffing around, MLPs (particularly pipelines) and merger arbitrage.  I'm looking for special situations and high, solid dividend yields.  As you can tell, I'm not sold that there won't be more pain before this is all said and done.  Hopefully my active limit orders will protect everyone from any additional pain.  We'll see.

Deej

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#8) On October 13, 2008 at 3:45 PM, awallejr (79.54) wrote:

Nah, thank me.  I purposely picked SDS at 120 to get this rally going ;p

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#9) On October 13, 2008 at 6:37 PM, anchak (99.87) wrote:

I was wondering where you had been...as Tasty say s"O the prolific one!"

MLPs and High Dividend yields - second that! What a pity I cant do much in real life..... too much uncertainty!

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#10) On October 14, 2008 at 2:21 PM, LonnieLewison (< 20) wrote:

You are absolutely right, getting happy about an up day is as unproductive as getting upset on a down day. Reading that made me think of an article I just read this morning called “Why This Market Can Easily CRUSH You” by Chris Rowe where he states, “I'm sure the market can, and likely will trade up some more, but this is not the play you want to bet the ranch on. When a market drops significantly like it just did, there is almost always another low that's made at about the same exact level.”His point is that it’s a way too risky to be part of this first move up, and that smart and savvy investors wait until the market retests the bottom.In case you want to check out the whole article, here is the link: http://tycoonreport.tycoonresearch.com/articles/347866416/why-this-market-can-easily-crush-you

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