About the Author
W.B. Busin
It is a wonderful life. Blessed to be in America.
Loves- God, family, research, markets and business.
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Elite Trader's Journal
Let’s discuss financial markets and money
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IMVHMO
That title, “IMVHMO”, will always describe directly whatever I write here in this wonderful forum. It is a slightly altered but common Internet acronym or shortcut. Here it means “In My Very Humble Market Opinion”. I hope it will also remain a constant thread in any of your participations in this conversation about investment and trading. We will expect nothing less than civility among opposing views. Anything less and the delete button gets a workout. Hey! Women and children read this too! :)
My opinions are based on decades of market research and learning how to separate opinion from fact. Learning to keep opinions from influencing my stock market actions and decisions is critical to one’s success in the markets. I hope these opinions help you enjoy the beauty of this thing called ‘free markets’. Oh, yes, I nearly forgot. I do use humor to make a point or two … but I’ll let you know quite plainly that I’m planting my tongue in my cheek.
How about this for a format to begin this online research ... I’ll give you my view of the current stock market and where it’s headed. Then each day I’ll give you a portion of my macro and micro rationale or perception of the American trading markets and economy. Along the way I’ll throw in a world view and how it might have a bearing on America and its major trading partners. This column or blog is for you, so please ask a question if I write something confusing.
Who Knows What?
Some people will read this blog and think it too simple. Others will think it too complicated. Just hang in there! In order to get us all on a somewhat level playing field, I want to initially record some ideas and methodologies that readers, and future new readers, can refer to in the archives of this blog to keep pace with the markets.
So it might sound like I’m writing to some 17 year old guy who has just been assigned to a team in a simulated stock market game. I’m also writing this for the benefit of the business woman who hasn’t had time to learn about the stock markets since college. She depends on her financial planner to suggest additions to her portfolio. And, it won’t do anything but benefit you, the seasoned expert, to refresh yourself with this overview of markets and what you should not forget about them. So, please indulge my effort at combining basics and higher level strategies into the same market song. Maybe it won’t be too far off key.
What do I think about today, Friday, September 30th, 2005?
The indexes rallied a few points. Free Index Charts (we’ll list some other free charts later). At the top of that Dow graphic are tabs for the other U.S. indexes like the S&P 500 and the New York Stock Exchange. Snoop around on that page if you’ve never seen charts like those. By the way, if you want to remain on this page while viewing any link or other site (such as that Yahoo chart), just “right click” on the link (not left click), and, then click on that “Open in New Window” in the box that pops up. That new page/website will come up in a new window. That will be real helpful when we discuss things going on in a chart. You can look back and forth between the text here and the chart.
Yes, the indexes rallied. But what next, WB? Well, the rallies are dying quickly these days. It seems to take more and more energy to move up. I’m more and more encouraged in the view that we are headed down in October to a real healthy low.
That means that we could see a good and hearty correction, ending around October 24th. It actually might get really vicious. Vicious, as in about a 150-point drop from the recent top of nearly 1250 in the S&P 500. That would put it at about 1090 or so. For the Dow Jones Industrial 30 (DJI), which recently peaked in March just over the 11,000 level, a drop to 9,000 is in my sights for a projected low area. There are higher logical levels of support. Those lows mentioned are the extreme bulls-eye targets.
[Note: A loose relationship of 8:1 to 10:1 exists between typical daily price changes in the DJI vs. the SPX; as in DJI up 10 points and SPX up 1 point.]
It won’t be a straight line drop or crash. It should stop declining for a few days, on or about the 7th of October, for a bit of a bounce. Then after bouncing, the markets should really get moving to the downside into the 24th. Many times the last part of a decline is the most volatile. It can scare the ears off of a bat!
The most important date or ‘time locus’, as I call it, is the Oct. 24th. I expect a low but the index isn’t always as cooperative as I would like. Nevertheless, the 24th remains an important time locus whether a high or a low.
So if the drop gets really nasty and scary about that Friday before the 24th, I might want to start looking for good stocks of good companies that have gotten slammed, but have held up much better relative to the rest of the stocks in their sector. If I hear people reminiscing on TV about the ‘crash’ that ended on October 19th in 1987, I’ll just go find something to buy and wait for the equally violent upside reversal to get going on Monday or Tuesday. Then, buy it … and take a profit when I’m laughing.
Wrong! Who? Me?
So how will I know if I’m wrong? The S&P 500 Index (SPX) will make a higher high than the intraday high of 1243 made on September 12th. We’ll use the SPX as the signal and the DJI as the confirmation. If it breaks above SPX 1243, then it should just keep going up. Why? September 12th is where and when I got a “sell signal”.
Seasoned market veterans will be a bit alarmed at the severity of the correction I have just projected. Perhaps I should calm their fears in advance and say this: No matter how deep or shallow the correction, assuming we see a correction, the monster rally over the succeeding 6 to 8 months is going to be launched from that low. I have no qualms about easily seeing new all time highs in the Dow 30 (above the 2000 high of 11,750) and at least 1400 in the SPX (possibly even 1500). Well, that gets us out to spring/early summer. What happens then? Let’s just wait and see what happens in October first.
If I’m wrong about those October dates marking lows, and in fact, they are highs … well, let’s just say that I won’t be so bullish about the next 6 months.
Yes! It is an important juncture in time just ahead. It may also be accompanied by some “not so nice” completely unrelated event, which then can be blamed for any decline.
I’ll end with this relevant old market saw, “Buy fear. Sell dear.” Easier said than done until you get the gist of it.
I'll post a few more things this weekend. They might cure your insomnia! :)
See you Monday.
Always be a blessing to others.
W. B. Busin
Published by W.B. Busin on October 1, 2005 08:08 AM
