Dow Hits Bear Market...

Monday, June 30, 2008

Going into the last trading of the quarter, stocks have taken back any gains it had since September 2006.   Oil continues to be the main catalyst for the downside and there may not be any relief in sight.   However, if you are a contrarian, you have to be thinking that this oil bubble is getting close to bursting.   When I start hearing people say "it's different this time," I start looking to do the opposite.   There are pundits out there saying that there is no way oil will ever going down and it's going to $200.   It may go to $200, but typically these parabolic moves eventually correct themselves.   And when they do, it is painful if you're a long investor.  

 

My advice to you is to not fall in love with these energy stocks that are showing no signs of weakness.   Because when you least expect it, you will get punished.   Just think about how investors felt about the tech stocks in 2000.   Or about what happened to the real estate market.   As recently as two years ago people were saying you can never lose in real estate.   I heard folks say that "if you buy condos on the water you'll always make money."   "They're not making any more land," famous last words.   Well, I think you get my point.

 

The fact that the media is making a big deal about the Dow Jones hitting bear market territory will likely add some fuel to the fire short-term.   However, the market is already in a significantly oversold state and selling now may be like "closing the barn door after the horses are already out."  

 

For now, we still need to be extremely cautious.   Over this past weekend I saw a tremendous amount of carnage with regards to the charts.   However, I did manage to find a couple of ideas in the bio-tech sector.   I've been getting the feeling that money was starting to flow that direction.  

 

The focus list has been updated with new stops.   If there's anything I can do to help, please let me know...

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