Today's Market
by Dr. Invest

Well, no comment was needed for Monday. My estimate of a decline of 1+% was far exceeded. Today we enjoyed the "Dead Cat Bounce", no offense to animal lovers. Just when the decline in the market was so painful it brought tears to your eyes, the sudden rise in the market could only bring a small feeling of relief.

If you didn't have the chance to exit the market and move to cash, it would be safest if you REMAIN SEATED at this time. This roller coaster market will continue for the next few weeks with breath taking ups and downs; and typical of roller coasters, the ride will eventually end at the same location. A good financial advisor will remind you that this one little jostle in the market will soon be forgotten and you will recover from your loss.

You may ask, what should I do now? I want to encourage you to read the previous blogs on The Market Today. There is a DIRECTION that the market is taking and it seems that the OVERALL MARKET is moving downward. We already know that in the months of September and August the historical market returns are poor. This means that the winds are unfavorable for equity investments until October, and even then the winds will need to be re-tested again to see if overall market is advancing.

There are gains to be reaped right now, but the risks are too high. You don't want to learn the hard way, that your favorite stock that went up 8%, 12%, or 14% yesterday when you were not in the market, will drop 4%, 8% or 10% once you buy them tomorrow. No one can know what the market will do when it is swinging wildly. Wait until there are a number of days that show regular and predictable rising returns from the market.

Here is a diagram for the trajectory of a bouncing ball. Notice how the ball, as energy is dissapated, bounces lower and lower.
 
The market moves in the same way. This stock graph shows what looks like a W at the begining, with the market moving from higher highs until it reaches its maximum peak, then a series of lower lows in the market as the energy in the market dissapates. If you look at the very end of this chart on the right, you see a sideways motion called, CONSOLIDATION. What is important here is that without something to ENERGIZE the ball, it will bounce lower and lower, just like the market will move lower and lower unless something is there to energize the market. The market is far more complicated than a bouncing ball, but if there are fundamentals in the market like "demand for goods" and "profits", the ball becomes energized and bounces higher and higher.

The question that you must ask yourself, "Is do we have something energizing this market?".  Even the most bullish analysts acknowledge that growth and unemployemnt is at best, tepid and at worst, entering a recession. There is really NOTHING that can energize the market at this time, so the ball must move downward.

Closing Thoughts

What can energize the market are three holidays where large sums of money is spent. This means people buying and companies making money. These holidays are: HALLOWEEN, THANKSGIVING, and CHRISTMAS. If my speculation is right, we are still set for market improvement in October. So hold on, it will get better.

(Note: The above article is not for financial advice, but soley for entertainment purposes.)