Investor’s Edge: 09/30/2015
We remember 1998 very well. There was some sort of Russian Ruble crisis. The market shaked and shuttered. The market topped out in July, had a vicious drop into the end of August (akin to the drop we just had into late August). It then rallied up into declining moving averages before failing (just like the markets did on the recent “fed thursday.”) It then dropped back viciously into early October culminating in a high volume, reversal day that turned out being THE bottom. We remember saying that there was no way this could be the bottom. Markets just don’t go down that far and just turn right back up. It took us a good two to three weeks of upside and a move above the first definable resistance level before we finally got up the nerve to even buy something.
We made sure we mentioned 1998 in our weekend report. The market action of today simply looks like the action of 1998. We have now dropped back to the lows. There are a couple of important differences though. We still have not had a huge washout day, a day in where all the late sellers panic out at the most inopportune time. More importantly, back then, the market top seemed like an event. This time, this market top occurred over many months. Like then, we are in the camp that we can see A low here but have our doubts we will see THE low.
We just thought it worth mentioning that with “government run markets,” anything is possible and that with markets, we will be flexible to go with the flow if evidence comes in that THE real low is in. We are holding out hope that we are seeing a repeat of 98 because it is much more fun to have markets go up.
The market is experiencing another one of those huge gaps to the upside this morning. Keep in mind, we have seen this before…only to fail miserably. Keep in mind, in bear markets, rallies are strongest. Keep in mind, in bear markets, very often, markets will gap up only to disappoint. Keep in mind, a break below August lows will only turn what can only be categorized as a vicious drop into something much worse. We will be ready for anything and stay flexible.
Investor’s Edge: 09/29/2015