Post by hightide on Oct 18, 2008 16:33:54 GMT -6
As I noted above, several things came together last weekend for a world coordinated effort to calm the markets. The biggest item being the investment by the government in several large financial institutions. Monday was a great market day, and the rest of the week was lackluster. I noted that a short term bottom was probably established on Friday Oct. 10. I did not define short term. I now believe that bottom put in last Friday will not hold and the market will go lower. A perfet bottom process would be for the market to move higher over the next couple of months and then go back down to the previous low and not go below that number. That would be a good confirmation and increase the odds that the bottom is in, and the market could begin a more meaningful move up. That is called a "double bottom" and it looks on the chart Like the letter"W". Textbook. Following are reasons why I think that the market may go lower after a brief move up. Weeks not months. 1) Third qtr earnings are in the process of being released and analysts are not reducing their earnings estimates enough going forward. IMO. 2)Abbey Joseph Cohen, a well respected strategist at Goldman Sachs, stated that the market was trading at 10x earnings which is historically a low multiple. True, but when the earnings go down or are reduced by analysts, it could then be 20x earnings which is historically high. Almost as though the firms are trying to prop the market up. 3) Warren Buffett is publically stating that he is buying stocks. Almost as though he is trying to prop the market up and it did not do much and 4) Clearly the US Treasury is throwing money at the market, trying to prop the market up. I will remain cautious for at least the next 3 months.
