Update: Wednesday, March 5th, 2008 - Principles of the Stock Market - Investment Strategies, Analysis & Intelligence for Seasoned Investors.

Update: Wednesday, March 5th, 2008

Principles of the Stock Market

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UPDATE ON THE STOCK MARKET. The bulls are now on CNBC saying it’s too late to sell. I beg to differ since I can’t figure out why it’s too late to sell. Maybe because some portfolios are already down big, -15% or more. But that still doesn’t mean they can’t drop much more. Just think back to the dot.com bust. I guess this “too late to sell” advice comes from those many advisors not being able to discern when to get back in. Better to ride the swings out is the thinking. Stocks usually do blast off when Mr. Market finally looks past the bad times and these advisors are worried about missing that big move back up as well. As long as CNBC can trot out lots of bulls at the drop of a hat, I have to assume there’s no rock solid bottom in place, a temporary one maybe, but not a bottom strong enough to build an investor’s portfolio on. A Bad Day Turns OK. Anyhow it was another rough day yesterday. Especially bad, similar to Monday until the final hours when stocks did rally. Even with both top dogs of the Federal Reserve speaking, Chairman Ben Bernanke and the most experienced member Donald Kohn, they couldn’t jawbone stocks higher. In fact, seems like everyday Ben speaks the market sinks; he’s out there a lot, probably because of his push for greater Fed transparency, and has lost a lot of credibility with bulls and bears alike. Then, midday, we had one analyst from somewhere on CNBC pleading for an emergency rate cut. Hey, madam, the rate cuts aren’t working, thus maybe that’s proof we should be following (almost) the opposite strategy, keeping rates the same if not hiking them. At least we know that would help the US dollar and show some gumption in the battle against rising inflation, two admirable goals. Throwing more and more money at the problem is just giving inflation free reign to keep running wild. Gold was at $650 before the Fed started cutting rates, six months later gold is up an amazing 50% and approaching $1000. And we’ve recently seen what unfettered deregulation of financial markets led to. Greed -- from juicy fees from innovative securitizing of bad loans -- ran unchecked until it finally blew up, big time, in our faces. Schwartz View: Anyhow another -200+ point down day in the Dow reversed when, just like that late day report last Friday, there was talk on CNBC of some progress surrounding a deal to bail out Ambac Financial (ABK), one of the key troubled bond insurers. The question nor arises, how many times can we rally on this same news?

Posted 03-06-2008 9:52 AM by Richard Schwartz

Filed under: Principles of the Stock Market, Richard Schwartz, Trading, Technical View, Charting, Keys to the Market, Market Bottoms, Day to Day Action, Distribution, Update On The Stock Market

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