Digging in for the Long Haul
Mar 26th, 2008 | By Charles Delvalle | Category: Stock Market InvestingUp until now the big debate I had in my head was ‘how bad is this recession going to get? Would we just have slow growth for a month or two, followed by better numbers? Today we found out the answer to that question is no.The numbers on durable goods for February came out this morning, and they surprised economists by dropping 1.7%. Bloomberg went on to say ‘durable goods unexpectedly fell in February, led by the biggest slump ever in demand for machinery that indicates companies are becoming more reluctant to invest as the economy heads into a recession’.
So it looks like consumers AND businesses are starting to cut back on buying. This is something that will continue to work its way through our economy for at least the next few months.
In other words, looking for a bottom right now would be the wrong thing to do. Obviously the economy is still slowing and disappointing analysts. So long as it does that, the overall trend should still be down.
Remember when I told you last week that I’d be shorting the bejesus out of the Dow at this level? Well it’s true! I don’t think the Dow will make it past 12,800. On the other hand, it could fall to 11,800 or even 11,600.
That’s a 1,000 point drop in the next two weeks.
Of course, the only thing that will make me wrong is if I’m wrong! I don’t expect to be wrong simply because I hate being wrong. But, according to my mind numbing addition and subtraction skills, this market should move down for the next few weeks.
So damnit, that’s what I’m going to play.
One thing to always remember is that you have to be willing to make a trade when you’re scared you might be wrong. In the end, trading based on charts is system based (with a little bit of gut instinct involved).
My system tells me the Dow should fall further. And my gut tells me this market can’t go much higher. Everyone is swearing that we hit a bottom. But they don’t realize that a bottom isn’t always V-shaped. Sometimes, they take forever to play out.
So you know what? I’ll trade based on what I see. And you should too.
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Charles Delvalle is a self-taught market-timing professional and value analyst who's followed and invested in the market for the past ten years. He uses a unique combination of technical and fundamental research to pinpoint rapid profit opportunities with stocks and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering undervalued, cash-rich companies. He frequently mocks government stupidities and points out the "inaccuracies (or lies, take your pick) that government reporting frequently dispels as "truth".
