Thursday, October 16, 2008

Which Way Will It Go?

Over the course of five days, we have witnessed historic swings in the stock market as show by this picture:
Anyone who tells you they know where things are headed in the short term, is just guessing.

So I guessed with a couple of purchases on 10/2, 10/8 and 10/10 trying to work my way in where I thought the bottom was. Of course, it went down from the first two trades and is barely even for the 10/10 trade. They were not big positions as they total <6% of my net worth, but in hindsight, I should have waited.

So, my investment strategy is to let things find a bottom and then work their way up with some strength. What I mean by strength is up moves on good volume and several days of sustained increase. Sure, I will miss the real bottom, but that is better than falling for a bear trap.

I should mention that I am looking for the bottom within the next four weeks, a decent rally and then a top followed by another bear market decline. Of course, we could continue the downward trend in the run up and following the election. In that case, I will sit here with cash and wait for better times and better deals.

That is my guess. What is yours (backed up with cash entering the market of course)?

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