Monday, March 16, 2009

Taking the corner on two wheels?

The chart below gives a bird's eye view of the broad market. Each colored section was an oversold correction, a bottom that failed. Buying the bottom of a market is an exercise in ego. We all like to bag the big one. Prudence suggests awaiting the turn will be a more reasonable entrance, although valuations support small purchases now for investment, not speculation.

Already this market has seen more bottoms than a nudist colony. At last count there have been five moments when the market had "found a bottom," only to cascade once more on another wave of selling.

The news last week was insipid but interpreted as positive. When bad news is met with buying that MAY be a bottom. When the averages move above the moving average for longer than a few days, then we can begin to look again to constructive buying.

There most assuredly will be an end and the valuations of today portend better long term returns than any time in years. I question those who bought greedily forty percent ago and now refuse to put a toe in the water. We will continue to be judicious and cautious, but most of the harm has been done. Now is the time to engage in strategy, not fear, nor greed.

Unlike Warren Buffet, we'd rather make late entrance to this party. But an entrance is not unwarranted.

John Barnyak