The New Stock Market Order
Monday, October 20th, 2008
By Michael Lombardi, MBA for Profit Confidential
In times like these — when we see the Dow Jones Industrial Average up 400 points one day and down 400 points the next day, when we see 1,000 point swings by the Dow in a single day – volatility reigns.
Stocks go up for only one reason: more people are buying stock than selling. This can now be defined as the “greed” period in the market from 2002 to 2007. Stocks go down for only one reason: more people are selling stock than buying. This can be defined as the “fear” period, which has reigned since the beginning of 2008 and still continues today.
Have we found a market bottom?
My flat out answer is no. Once the Dow Jones Industrial Average broke below the mid-point between its 2002 low and its 2007 high, all bets were off as to support in the stock market.
Looking at a chart, my technical side says the Dow could test its 2002 low just above the 7,000 level, which is still a good 20% below its current level. Remember, the stock market is a leading indicator. Therefore, a breakdown by the Dow below 7,000 would be an ominous indicator for the future of the American economy.
Fundamentally, some great stock values are starting to appear. And the patient money is now jumping in and buying. For example, and as we all know, Warren Buffett has been investing billions in U.S. companies. The investors buying stocks today are taking the position, “I’ll take the risk today and buy stock, even if the market goes down another 20%, because if the market doesn’t go down, I’ll have missed a great buying opportunity.”
For me, the new stock market order is about finding a proper valuation of future earnings. And unfortunately the stock market hasn’t found it yet.
Next Post: The Return of the Dividend
Previous Post: Market Sees Some Positive Signs
Tweet
Sign Up for PROFIT CONFIDENTIAL and
receive a FREE copy of our exclusive report:
"A GOLDEN OPPORTUNITY FOR STOCK MARKET INVESTORS"
We respect your privacy and
will never share your e-mail address.
Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
