Top Line: Here we are at the start of November and we have a calm day. There was very little action on Monday possibly due to the election anticipation but also possibly due to the end of the crazy month of October.
The start of a new month puts in some distance from the two important lows of October, the spike low on the 10th and the low close last Monday the 27th. The Update thinks these lows are very important and represent the lows of 2008. There are many who are looking for another spike down but that spike may only be minor pullback not something that takes out the October lows. We remain fully invested in long positions.
We continue to watch the important indicators that represent coming off the lows. The biggest one is the volatility index, VXO. It has come off its highs over the past week. After hitting a high of 103.41 back on October 10th (spike low) the index backed off. After the market went down again and put in the closing low on October 27th, the index could only manage to get back up to around 85 and now has dropped into the 50's. Our other indicators are less definitive but are supportive of the move off the lows.
The look and feel of the trading in the last few days presents an opportunity for a pullback going into the election. As mentioned earlier, this should not be a huge spike down, just a pullback. These are opportunities to buy in case you haven't completed your buying. The main idea is to set your price under the market and let the stock come back to you.
We received an email from CM who shared an article with us and asked about our timing versus this guy's. Sometimes, others read the Update to get good timing ideas but probably not this guy. He's only got a 1.9% return through September. Following the Update's timing there should be a much better return than that (at least in 2008). Of course, we are still trying to get even after taking those GDX shares into our portfolio. Even with that, we are doing pretty well on the whole year.
We are going to give way to the election and see what happens tomorrow. From all the media attention, you might think the market has priced in an Obama victory but the actual news, one way or the other, may allow the market to react. We see a pullback coming on Tuesday and possibly Wednesday depending on who wins the election but to us these would be buying opportunities.