Market Update: Now and Zen

Just time for a quick follow up to my March 11th blog, which nailed the March 10th low. Since then, we’ve had multiple follow-through days, however volume has been suspiciously low, which could, actually, be interpreted bullishly (in a “double bluff” kind of way, to make a poker analogy).

Since the follow through last week, I’ve accumulated small positions in six stocks (see my March 18th tweet).

As shown above, during the first week of March 2009, we retested and undercut the November 2008 panic lows.  In a minute, I’ll show you the chart covering the 2002/2003 low.

Remember those fall 2008 lows?!  Credit spreads exploding, “Blue Chips” imploding, option volatility shooting the moon, all the while my man Nouriel Roubini dancing a jig in the end zone and coming into view of the trembling herd of CNBC-loving sheeple, as his Twelve Steps to Financial Meltdown scenario came true.  I hope you were paying attention, because what you witnessed was a rare event, a panic combined with a slow-motion capitulation, as a I blogged about and documented as much as I could: Lots of great images and comments here and here, and this one even saw respected VC, blogger, and twitterer, Fred Wilson drop by to comment.  Wow!  Crazy dayz.  It’s really important to soak those kinds of experiences in, they’re invaluable.  Same thing for the reverse, the exuberant peaks, such as in winter/spring 1999/2000 with tech stocks and 2004, when the 2nd-derivative of price housing price change was peaking — and I sold my residence and started selling my Montana real estate.

Anyway, this possible “fall low, then spring retest” bottom reminds me of  the 2002/2003 bear-market low (see chart, bel0w), which followed a similar sequence, except most stocks and indexes did not undercut the fall lows on the spring retest (they did this time).

The question now is: Was the March 2008 low “the” bear market low, or just the launching pad for bear-market rally #2? Seems about 50/50 to me, but like I said last fall, most bear markets last longer than this one, but most aren’t this steep, either.

Also in that article is this chart, which shows the duration of a set of economic slowdowns. In the US, the recession officially started in December 2007 and was “announced by the NBER in December 2008 (see my Dec. ’07 blog about private fixed investment and how it syncs with recessions and foreshadows the NBER).  If it’s a 2-year recession, it will end at the end of 2009.  If that’s the case, and if the forward-looking stock market does what it’s supposed to do (look forward 6-9 months or so), a spring 2009 bottom make sense.  If, however, an L-shaped recession, it might not end until 2010+, which would mean, “Buckle your seatbelt, Dorothy, ’cause Kansas is going bye-bye.”

One more point on the prior bear market: As shown and discussed last fall (bottom of this blog), the prior bear market had two rallies that showed on a quarterly chart.  We’ve only had one so far.  Could March 10th have been the start of another one.  Highly possible, but won’t know for sure a while.

What did I do?  I legged in last Tuesday, going from 100% cash to 12% stocks, then 14% stocks this morning.  Kind of cautious, I know, which actually suggests (in a non-statistically-significant way) that there’s more room to run (because many/most other people also have — too much? — dry powder).  On the other hand, we’re up 23% in less than two weeks, and we’re nearing the 200-day moving average from below, so some profit-taking is in the offing.  Cheers!

News of the day:

“U.S. stocks rallied, capping the market’s steepest two-week gain since 1938.”  More here, including stuff on the Treasury’s Public-Private Investment Program (PPIP): Bloomberg: “U.S. Stocks Jump, Capping S&P 500’s Best 10-Day Gain Since 1938.”

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3 thoughts on “Market Update: Now and Zen

  1. Just closed out all stock positions (long) I put at the beginning of this rally. Biggest gainer: RIMM 89%. Biggest loser: INTU -8%. Other big gainers included GOOG, ADBE.

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