Daily Investment Interpretations

October 30, 2009


2009-10-30:  What a day! Well, the verdict is in: Yesterday was a "flash in the pan". Everything I said about upwellings like yesterday's is true. Since March, these kinds of "up" days after markets have dropped the way they have this week have always been followed by additional "up" days. But not this time.
    T
he NASDAQ Composite sagged  52.44 points, (-2.5%) to end at
2,045.11, the Dow dropped 249.85 points (-2.51%) to finish at 9,712.73, and the S&P 500 slumped 29.92 points (-2.81%) to 1,036.19. Oil declined $2.87 to $76.99 a barrel, while gold fell to $1,040. The VIX climbed 5.93 to 30.69... its highest level since the July pullback.
    I didn't think this would happen. I thought the market would either go straight up today, or would dip and then go up. I was wrong.
    Although I made about 0.76% on my investment in QLM,
this has been an object lesson in the fallacies of my own investment interpretations and decisions. I generally follow the investment advice of the China and Emerging Markets Report and the Top Stock Portfolios Daily Decision guidance, but yesterday morning, I played a hunch. It worked out yesterday, and I "got out of town ahead of the sheriff" today, but long-term, I'd probably lose money rather than making it.
    David Moenning, the founder of the Top Stock Portfolios advisory service, observed today that the market right now is just too volatile. Also, the markets are looking vulnerable. Volume has been rising as the markets have fallen, suggesting further downside to come. (Today's selling volume matched that of Wednesday's selling pace.
    Mark Hulbert points out that traditionally, the next six months are historically the best months to be in stocks: A treat from Wall Street? (audio). He also notes that this rule-of-thumb wouldn't have worked in 2008 or early 2009. You should have stayed out of stocks from June, 2008, to March 6, 2009.


2009-10-30 (An Hour Later):
  The bulls and the bears have been duking it out this morning, with the bears still in control. We won't really know until the close, unless the indices break up or down dramatically. Basically, though, looking at the charts, it looks to me as though there should have been follow-through this morning if yesterday's upsurge marked a market turnaround.
    I sold my QLD just now for about a $200 profit. (I could have sold my QLD for nearly a $500 profit a little earlier this morning, but I guess if I had that power of prophecy, I could become a billionaire in short order.)

2009-10-30 (After the Opening):
  This is the moment of truth. If yesterday marked a turnaround off a short-term bottom, the markets should experience early selling, followed by a rise. So far, the sellers are in control. 
    Both Mark Hulbert: No more bullish now than 2,000 points ago, and John Buckingham, the publisher of The Prudent Speculator, are observing that sentiment is quite bearish, and that, from a contrarian viewpoint, this is good for the markets.