Calling the Bottom for the S&P at 800

The S&P 500 index (SPY) fell another 8% last week and now sits near 6 year lows. But unlike the last market crash from 2000-02, this market is not expensive. The heavy selling has nothing to do with lofty valuations, instead, a weak economy, slowing growth, and fears of a recession are what's driving investor psychology.

However, I can't emphasize enough how good of an opportunity this is to buy stocks. As Warren Buffett says, "be fearful when others are greedy and greedy when others are fearful". The S&P 500 index has found the 825 level to be a good level of support looking back over the last 10 years.

For short-term trading, I've recommended trading (SSO) and (EEV) in my previous post titled Range Bound Market no longer for Stock Pickers. However, for long-term investors, the number of stocks I could spew out are endless. Google (GOOG) and Apple (AAPL) have been my obvious favorites but others including retail names Amazon (AMZN), Best Buy (BBY), Saks (SKS) along with energy names like Chesapeake Energy (CHK) and Transocean (RIG) are great bargains.

I will try to publish names of some other stocks I really like at these levels, meanwhile, I recommend building positions in some of the above names as S&P approaches 825. Why 825? Because I think that is the bottom. There, I called it. I think 800 is the absolute bottom for S&P 500.

Full Disclosure: I am long SSO and AAPL, but my positions can change anytime without notice.

Comments

[mgcolin:]

Everyone can talk all they want about valuation - But in the new world of zero profits for great companies, massive losses for most, shrinking economies, inflation, we cannot use trailing P/E as a metric and forward P/E is meaningless.

The Japanese Market hit a 26 year low today. The US economy today looks exactly like Japan did 10 years ago. So Dow 811 (26 year low) is coming.

Face it - the smart money is liquidating now, this will continue.

S&P 400 within 6 months, S&P 100 will be the bottom, by the end of 2010.

2008 Oct 27 06:18 AM

[investor88:]

Mgcolin is being a little extreme here Dow 811, sp500 400 between now and 2011. However this "black swan" event cannot be ruled out completely and therefore investors should be more cautious than ever.

2008 Oct 27 08:49 AM