Saturday, April 16, 2005

Wow!!!

Wow!!!

That's all I can say after the market action this week.

The bulls were shredded and eaten by the bears and that might be the nice way of putting the situation. Take a look at the longer term pictures of the big three indicies:


DJIA Weekly Chart Posted by Hello

The Dow Jones Industrials smashed through the 50-day SMA on increased volume. The index is looking to be pretty oversold, but what's not to stop it from getting extremely oversold. We do have that red line that switched from support to resistance that may be able to stop this bear raid, but like always we'll have to wait and see (I can't read the future...yet).

So, we could find support around the 9,900-10,000 range. The 200-Weekly SMA is currently at the 9,649 level. The 200-Weekly SMA is the level that stopped the bears last year and we might see it brought out this year as well for bullish re-inforcement. That would be a shock for all of those bullish talking heads (To see the DJIA below 10,000).


IXIC Weekly Chart Posted by Hello

The Nasdaq, which was one of my last hopefuls broke through the support we've been looking at, but on non-yearly highs of volume (Got to look for something good). That is definitely not a good sign, but we are oversold here as well. We could definitely see a bounce, but if that bounce is stopped by the 50-Day SMA, place your protective helmets firmly on your head and watch out.


SP500 Weekly Chart Posted by Hello

The S&P 500 sits a little below it's 50-day SMA, but is also in oversold territory.

Are we going to see a bounce of these three indicies next week? Was this just a bearish headfake like the last bullish fake? Is this all just a bad dream?

Wake up Soothsayer!!!

Wake up!!!

Ok...sorry...let's get down to business.

Here at this blog we are long-term investors and not of the trading type. So, we have to act differently. If we were traders, we could look for a gap down on Monday to get long with very tight stops. But, we are investors and therefore we have different strategies to implement.

We don't want to get in and out of stocks. So, what do we do here?

I have no problem with recommending that we step aside and take a cash position or look into bearish mutual funds (for at least some of your capital). Soon we will begin seeing many opportunities and we want to have a lot of cash on hand when that time comes. This could get much worse later. True, we may see a pullback, but it will be on decreased volume (most likely) and I believe we will begin heading back down after this next oversold bounce.

I could change my mind. This could be the bottom for the year, but the action is not looking good for the long-term investor.

Many charts that I have been watching are breaking down. I've been watching AIG, General Motors, Home Depot, Wal-Mart, Microsoft, IBM, and Gateway pretty closely...all have broken down. That is not good. One of the only good long candidates I can find is McDonalds, which I recommended a buy a while back.

I'm still recommending a purchase in MCD, but you might want to wait until it touches it's 50-Day SMA. I think it will find support there. I couldn't/won't blame you if you don't want to purchase anything right now. It's pretty ugly out there, but if people are sad I think they'll want to stuff their families faces at the golden arches.

Be careful out there.

We could look to the international community for help...let's see what they've got to offer. I was recommending individuals look towards the Japanese market for some help in accumulating wealth. Let's see if they are willing.


EWJ Weekly Chart Posted by Hello

Nope...the ETF for the Japanese market (Ticker: EWJ) has also just broken down last week on increased volume. Not a good place to hide either.

Any others?

Sweden...no, but maybe soon.
Germany...no, but maybe soon.
Hong Kong...no.
Italy...no.
Belgium...no.

Well, you get the point.

It's not looking good out there (if you are long), but I'll keep checking this weekend and maybe I will spot a light at the end of the tunnel.

Best Regards,

The Soothsayer of Omaha

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