Friday, October 10, 2008

The Great Deteriorate of 2008???

Thank you to those of you who provided some kind words for us since our last post. It is much appreciated.

We pretty much completed our buying program today after five days of buying. We think we have gotten very good prices for the purchases we made today but we may not have caught the lows. We are just grateful that we can buy at such remarkable values. Normally, catching the low or the high in the market is Impossible but, even if this week isn't the low, we still got great prices. We do have a little cash left but we like to keep some powder dry for possible future opportunities.

Ok, let's get to it. Here is a quote from our Monday, September 29th post:

"For now, we will keep our 9000 target for the Dow and we will use that number as sort of a loose target. The problem with these multi-year lows is that there is the possibility of the low occurring during the day. There may be a spike down for some reason and then the market may come back very strong. This may start at 9200 one day and drop to 8350 or so and then rally to 9500 by the end of the day. So, the report will be that the market rallied 300 points when it really was a watershed day and then a huge rally out of the lows. We would measure the low, on a day like that, as 8350 but in a 401(k) there are no intraday moves, just end of day prices."

On Friday, October 10th, we see somewhat similar numbers with similar magnitude but just a little off. Thursday's close in the Dow was, let's round these numbers, 8600. Friday, the Dow spiked down to 7900, about a 700 point drop and by late in the day the Dow sported a 300 point advance at the 8900 level but failed to hold it. Not a bad representation but not quite what we wanted to see to absolutely call a low. That's not to say it wasn't the low we were looking for, just that we would have liked to see a positive close. That means that Monday could fulfill that requirement. We'll wait until we see what the weekend brings before we get too definitive.

Friday's trading was truly mind boggling. The 700 point drop to start the day gave everyone chills for about two minutes and from there we saw a Straight up move that took the Dow to a positive 100 reading in about a half hour. How long does it normally take to get an 800 point up move in the Dow?!? Usually more than 30 minutes.

During the day the VXO jumped, and we do mean jumped, to an extraordinary high of 103.41. You may never see this number again in your lifetime. Yes, it was higher than that back in 1987 but this is a monster number and means there is extreme fear, which is a major under estimate.

When the VXO hit that 103.41 (we still can't believe that number), the Dow decided it had enough of the downside and went on another tear like the 800 point rally in the morning. So, for the second time in the day, the Dow sprinted up 800 points before dropping about 400 points to close down a little over a 100 points.

As part of this day, we decided to take a quick look at the number of new lows. We have been mentioning this indicator over the past few days because it puts this move in some perspective. On Friday, there were 3306 issues traded and 2901 had new 52 week lows...we are running out of words to describe these things.

These are truly historic times and will be talked about for years to come. We still talk about 1987 but now we can add 2008 to the list of stock market topics. Going back to last October, the Dow was over 14,000 and today it traded under 8,000 for a 6,000 point decline for the year. No wonder people are scared.

This past week of volatile stock market action should put a cap on the "Stock Market Decline of 2008". That would sound better if it was the decline of '09 so we need to change it to the "Stock Market Deteriorates in 2008". Ok, Ok, it's not that good either.

To finish our special Friday night it's not a Saturday night special...we wonder what will be on the minds of the people this weekend. Will there be another major down opening here in the US due to people talking themselves into selling, finally? If so, it is very possible that a severe decline could appear on Monday. If people are feeling relief because the market managed to recover from its steep decline on Friday, then we may just go straight up on Monday.

You may remember we still think the Low will occur on Monday, but we have no problem if Friday held the low of the year 2008.

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