Quick Thoughts On The Market

I have to make this quick. The Dow has dropped decisively below 7,000 this morning. I recall reading some articles talking about this or that important technical level on the S&P 500. I don’t know it matters much as its seems more likely than not that those technical levels will not hold.

This move does not surprise me and hopefully does not surprise regular readers of the blog.  There is a reason, after all, why I’m blogging the book, Anatomy of the Bear, in 4 parts (view part 1 and part 2 and I promise part 3 later this week). But as I said in the last portfolio update, the fact that we can mark the bigger trend does not mean we can make money off of it (well, other than shorting). I am still looking to be active in the market but also being very selective and stringent in my requirements (at least I hope that is the case).

We know we’re in a bear market. We know it’s getting worse. What we don’t know is where it bottoms and hiding in a bunker doesn’t strike me as the best option.

Speaking of portfolio updates, I will post my results for February later this week as I am out of town on business. I hope to have an exciting announcement upon my return. I am receiving email but unable to reply due to network/server issues so please excuse the delay in my responses. I will write when I get home.

Special thanks to Jason, who gave me an eighth grade spelling lesson.

More on this topic (What's this?)
Dividend cuts and S&P500 valuation.
2009 Dogs of the Dow
Read more on Dow Jones Industrial Average (DJI), S&P 500 (SPX) at Wikinvest

4 Responses to “Quick Thoughts On The Market”

  1. Dax Says:

    I have 2 conflicting thoughts today.

    On the one hand, everyone from David Kostin to Louise Yamada is looking for 6,000 on the Dow, which should be contrarian pointing to an up move.

    On the other hand, I’m seeing biggest sell-offs today in the stocks most held by hedge funds (MOS, GDX etc) which worries me that we’re going back to the hedge fund liquidations of October.

    I added some MOS today (stock, not calls).

  2. Davy Bui Says:

    Hey Dax,

    Good comment on the hedgie positions. That would also explain the move in gold today too. I don’t follow that indicator too closely — does anyone know how to get at the list of the most popular hedge fund holdings?

    I don’t know about using Yamada as a contrarian indicator. I remember somebody making the case for Buffett as a contrarian indicator once too and while he’s been early, the track record speaks for itself. It seems counterintuitive to use the best players as contrarian indicators.

    Now if Time or BusinessWeek prints a Dow 6000 cover story (beforehand), I’d be more with you.

    I did put on another position today but until this trip is wound up, I can’t disclose any new positions.

  3. Dax Says:

    I don’t know of a consolidated list (though I’m sure someone like Bespoke puts one together.) The two hedge managers I follow closest are Soros and David Einhorn. I believe Soros’ largest postions at 12/31 were Potash and Petrobras and Einhorn’s were GLD and GDX.

  4. Dax Says:

    PS I didn’t at all mean any disparaging reference to Louise Yamada. She and David Kostin (of GS) are the two forecasters who I have the most respect for, that’s why I follow them.

    It’s the unanimity among anyone I talk to of 6,000 on the Dow that makes me a bit skeptical. Also Louise is terrific at analyzing a trend, but chartology is less good at predicting a turning point.

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