Tuesday, March 25, 2008

Is the stock market a screaming buy?

When should you buy? The age old question. The old Wall street adage says "buy when there's blood in the street" There's a lot of truth in that one. Here's my signal for when to buy. When I'm scared to death I'm going to lose money. It's that simple. Look at the first chart of the S&P. I remember investors were sure we were headed for the end of the world at the time. Nobody was brave enough to buy back in Aug. However the COT's were wildly bullish. Result the market rallied back to new highs. Now look at silver during the same time. Again popular opinion was that silver was only headed lower as it had not confirmed the strength in gold. If you had bought then you surely would have lost money. I can tell you it was tough to make that phone call on the 17th and place a huge order for physical silver. I think my knees were actually weak. Now look at the stock market over the last 4 days. The sentiment has gone from bearish to wildly bullish in less than a week. The large contract in the S&P is negative and getting more so. Smart money unloaded a ton of stock into Thursday's rally. This rally is not investors buying because they are scared to death of losing money. This is investors buying because they are scared to miss a rally. I'm seeing some of the same sentiment in the PM from e-mails I'm receiving. Investors are worried about missing the next move in the PM. This in my opinion is not a good reason to buy stocks or PM either one. I want to wait until everyone is scared to death (including me) before I commit my capital.