About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Thursday, January 17, 2008

Stock Market -- Good Luck!

The e-mails are rolling in. The message is that we have a
deeply oversold market on any number of counts. Agreed.
We are also in a bear market with a breakaway downleg that
just started this week when the SP500 took out important
support at 1375. Had we held support and not gone bear, I
would be as happy as the next guy to play this deep oversold
on the long side. But, in bear formations, oversolds are
inherently dangerous. The simple reason is that with bear
prints on the chart, oversolds can get even more oversold.

So I plan to leave the buy side to the young and the restless
and those older dudes who believe they have a nose for these
things. Rest assured, that whence comes the bounce, there
will be a fair number of folks who will sell into the rally.

My plan will be to look to short overboughts in the interim.
I will not be on the long side until my momentum oscillators
have turned positive. I wouldn't dream of arguing with the
timers who want in on the long side now, but I do not like
the breakaway action.

I have linked to a weekly chart. It will show a deep oversold
on MACD and RSI. It also shows a "death cross" with the 13
wk M/A having turned below the 40 and with the 40 wk M/A also
having turned down. The market has also blown through the 69
wk M/A containment or "safety valve" line. Chart.

I intend to watch the oil price closely relative to both stocks
and gold. A sharp break in the oil price would work to alleviate
the pressures on incomes and inflation.

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