Waiting For Our Sign of Recovery

Several stock exchanges posted the biggest daily and weekly declines in history, as most of the markets dropped 20% or more in one week. Long term LIBOR interest rates are still on the rise, nevertheless, overnight rates are already falling, and the volatility index VIX jumped above 75. All this big fear is reflected in stock price; the current global sell off is broad, as there is no distinction between sectors related to the economic cycle or recession proof sectors. Even defensive plays like healthcare are posting sharp declines. Nobody cares about debt ratio or focusing on untouched sectors.

I don't expect a "V" recovery, in fact, I do expect markets to go even lower. We saw last Friday in the U.S. before markets closed - the Dow Jones jumped 800 points in less than a half hour of trading - that there is cash waiting to get in. Record VIX levels or Put / Call ratios are monitored by all people. What I do expect is high range trading up and down. For this illogical trading, the most punished growing sectors (like energy and technology) will bounce the most.

For long term investing, I wait for a sign of recovery that history has shown to be the catalyst for change. If you looked at the end of the last bear markets or the Great Depression, there was always a common sign of recovery. When indexes form fresh lows higher than the previous lows, this will be the time to enter a position for the long term.

Comments

[Takayama:]

: When indexes form fresh lows higher than the previous lows, this will be the time to enter a position for the long term.

This is not necessarily so. Please do a study of the most recent greatest stockmarket meltdown in developed countries. The fall of the Great Samurai, and please check where the Nikkei Index is hovering at today.
I still remember this book - Japan as Number One, but not its author. It was quoted the Japan at that time was close to or already had out surpass the USA in many fields and industries, including computer technology and artificial intelligence.
My strategy would likely be based on fundamentals of supply and demand, and the law of cycles.

2008 Oct 16 01:43 AM