johnnymk

From his newsletter:

I hope you've been following my signals on the Dow. I nailed the top at 14,000, and warned you of an imminent collapse back in June.

Since then the Dow has fallen as much as 1,482 points, or just over 10%. And my systems have flashed no less than three weekly intermediate-term sell signals, indicating that the Dow is going to fall to the 11,000 level.

Will the recent actions by the Federal Reserve stop the Dow from falling? No.

What if they cut the Fed funds rate? No, that won't stop most stocks from falling, either.

There are many reasons, but the most important are:

The aforementioned mortgage crisis is going to make consumers and investors batten down their hatches, negatively affecting confidence and spending.

At price-to-earnings ratios of 20 plus, most stocks are overpriced, especially since they have already seen the peak of their earnings growth in the recent cycle.

At this time, overseas investors are more concerned with the downside risk in the U.S. than they are with the purchasing power of their strengthening currencies.

The U.S. government is in no better shape than the mortgage markets. Technically, the Federal Government is bankrupt, with debts of more than $55 TRILLION (counting all IOUs).

Up until now, that hasn't been much of a problem. But when investors are as frightened as they are now, the government's finances can suddenly become a very heavy psychological burden on the markets and for investors, especially overseas investors who have largely been financing our debts.

Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami.

VTGreg

I don't doubt it will move back to 11,000 and I don't necessarily see that as a bad thing. IMO it presents a great opportunity to get some more money into the market before the next big upswing. It will definitely be painful to many that are close to retirement.

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It only ends once... Anything that happens before that is just progress.

Courage is not the absence of fear but rather the judgment that something else is more important than fear.

Prngr44

I didn't pick the bottom that low but we were discussing this very same thing yesterday. I thought another 1000 point shave was more likely.

zippyjuan

11.000 is about what it was a year ago. Nobody can forcast a bottom and unless you are selling either now or soon it will not matter. As I pointed out in another thread, the market had been up about 30% in a year until the recent drop while the economy itself has only been growing at about four percent. A pullback from that would be normal.

If you do expect it to drop, then maybe you will want to save some cash to buy. But then again, you will not know when that moment will come and it may be back up before you make a purchase. You cannot time the market or predict highs and lows.

I am reminded of a friend who said that housing would collapse in San Diego and that I should sell my condo, invest the money, and then buy it back when it hit bottom (he predicted it would go down to what I bought it for at a time when the price had tripled). Had I listened to him, I either would still be waiting (priced for my place have dropped say fifteen percent), paying rent somewhere and not building equity, or buying a more expensive place and facing higher payments and property taxes. I would have needed a hefty return on the invested money to come out ahead on that one.

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