Fibonacci Financial

When Markets Correct Primary Trend Moves They Can Be Very Complex and Confusing.

What Should I Do With My Stocks and 401K Now ?

Where are we right now in the US Stock Market ?

What should our investment attitude be?

Point 1. The US Stock Markets entered a primary bear market in late 2007.

Point 2. In terms of Price Earnings Ratios, Dividends, Q-Ratios and other measures of value, the US Stock Markets were historically overvalued in 2001 and 2007.  This Bear Market decline will most likely not end until the US Stock Market is at historic lows in these measures of valuation.  The US Stock Markets will have to fall a lot more before that happens.

Therefore our current presumption is that the Bear Market is NOT over!

The current wave of talking head commentary regarding the beginnings of a new bull market are very likely wrong and will suck a lot of unwary investors back into the markets before this rally is over.

Its just a fact of life, Market corrections are usually very messy and unpredictable.  This rally in a Bear Market will be both frustrating and confusing.  Here are a couple of possible scenarios:

Scenario 1.  Consolidation.  The stock market will Consolidate (messy sideways action) here and then run up to a bear market rally top.  Action, sit tight and sell any remaining stocks at the end of the rally. Then….

SELL, SELL, SELL ! at the Top of The Rally

Scenario 2. Deep correction There will be a dramatic drop in stocks that scares the Heck out of everyone and makes it appear as though the rally is over BUT the stock market doesn’t break down to new lows.  Then the market frustrates the bears and rallies up to between 9,000 and 10,000 on the Dow Jones Industrial Average.  Then….

SELL, SELL, SELL ! at the Top of the Rally

Scenario 3.  WE ARE WRONG and the markets break down with one of the Dow Indexes breaking to a new low BUT the other Dow Index doesn’t confirm thereby setting the market up for a Dow Theory Buy Signal when both indexes then better their May highs.  IF this low probability event takes place, I will BUY, BUY, BUY

If any of this is confusing PLEASE drop me a comment and I will provide additional explanations and resources.

What Are All Those XXXX’s and OOOO’s on the Charts?

Several readers have indicated that they are not familiar with the point and figure charts that I use for illustration purposes in the blog.  John Murphy (world class technical analyst) provides an excellent overview of Point and Figure charting on his web site StockCharts.com.  If anyone is interested in why I use these “old fashioned” P and F charts drop a comment requesting additional information.

The next leg down in this Bear Market (after this rally is over) could be absolutely devastating. So, IF you still have a substantial portion of you investments in Stock, you must be ready to liquidate those positions at the end of this rally.  If this is the case please contact me so I can provide timely advice and guidance.

Do not get the idea that you can trade or make investment decisions from my blog entries.  These are an introduction to my services and do not constitute investment advice.