Thursday, December 13, 2007
Bull or Bear?
There's quite the debate right now going on as to whether we are starting a bear market or if the bull is still alive. This is probably one that will never be settled. Investors continued to hope all the way down from the top in Mar. 2000 till the bottom in Oct. of 02. However let me point something out. Without fail the market has seen a 4 year cycle low every 3-5 years for the last 100+ years. There have been no exceptions. For longer term traders I have to beg the question what's the point trying to catch the last little bit of profit in this bull? The odds are now very stretched against this bull lasting much longer. It's already tied for the longest trough to peak rise in history. Here's what is going to happen to investors who insist on trying to wring the last little bit of upside out of this bull. When this bull turns into a bear (and it already may have) these diehards are going to start taking losses on the long side. The longer you hold on to your bullish bias the more losses you are going to take. Eventually this cycle will bottom and when it does there are going to be incredible bargains to be had. However if you have been taking losses all the way down you will be gun shy and unable to pull the trigger when the time is right. You will miss those bargains. The next rally out of this low should be much more powerful than what we've seen in the past. Huge profits will be made in the commodity arena. Unfortunately you won't be able to make them if you've whittled away your capital trying to suck out the last dime of this bull. Patience to wait for that cycle to come is what is needed now. You don't have to be short and for most shorting is probably not a great option as the profits are limited. Simply go to cash and when the bottom comes you will be in a buying mood and ready to take advantage of Mr. Markets irrational move. I included a chart of the 98 cycle. Look at how much better entry one would have gotten just by being patient. This market gave a very clear entry at the exact bottom with a 2b reversal in Oct.