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Goldata Financial
Dedicated to above average returns in the stock market.
STOCK MARKET COMMENTARY
November 24,
2008
From Elliot
Goldberg, Registered Investment Advisor, Goldata Financial
Last week, hope of support at our lower trading band was heightened with a
few bounces off of it early in the week. When digested with similar bounces
last week, confidence built that this level would hold. Unfortunately, each
bounce produced a less energetic pulse higher and by Wednesday, it was
breached convincingly. Fundamentally, the news continues to skew to the
negative. Jobless claims continue to climb, most earnings reports paint a
bleak Q4, and new concerns about the banking system, and Citigroup (C) in
particular, emerged. Positive items were continued lower oil prices,
Hewlett-Packard's announcement that 2009 will be a good year, earnings-wise,
and the continued conversion of insurance companies to bank holding companies
to shore up their capital destroyed by their investment departments (Note to
them: I am available). At times like this, when support levels are violated,
we look for one of two scenarios to develop on the charts. The bullish
scenario is known as a "reverse head and shoulders" which simply
states that the previous bottom (the right shoulder) is followed by a newer
low (the head) on lower volume, which is followed by a rally that carves out
a test of the old bottom (the left shoulder). The bearish scenario is that we
continue to head down and try to identify a line of support (as our Maginot
line of SPY 83.75 was previously) that gets tested a few times before
bouncing up for good. Conclusion: Dreary does not begin to describe the
feelings we all have about the last few months. As investors, we must put
this aside and decide what is best from this point going forward. The
technical breach must not be ignored. Accordingly, I will, again, "sell
the rips" on the rallies and keep stops tight until we can identify one
of the two technical patterns described above. While it is never good to lose
money, losses have been minimal during this period, as investment discipline
has kept us largely in cash, due to my criteria of only buying stocks that
trade above their 200-day moving average. While many stocks appear to trade at historically cheap
values, investment discipline must trump perceived value in this environment.
We will get our day in the sun, where these same bearish patterns reverse and
become bullish, moneymaking patterns, but we must continue to stay in the
game and keep losses to a minimum, remaining patient for this bearish cycle
to end.
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