Happy New Year! The only thing to be happy about is that we are finally done with 2008 and the worst stock market performance in decades. For those of you who follow this blog you know that I track the Nasdaq and for the year the QQQQ (the proxy for the Nasdaq) is down -41.73%. This number by itself pretty much sums up the year on Wall street.
Using the indicator that I use to determine when to be in the market and when to be in cash allowed me to have a return of +13.71%. For most of the year I was sitting in cash. In fact I last exited the market on 09-04-2008. Since that time we have come very close to re-entering the market which happens when the white line passes above the purple line. I suppose if you were to use a magnifying glass one might argue that in the last couple of weeks the white line has passed over the purple line and therefore we should be back in the market.
The reason I did not re-enter the market was because historically when the white line crosses the purple line, it literally “shoots” right through and you cannot wait to get involved in the anticipated upswing. Contrary to that is the recent movement of the white line relative to the purple line. They have been moving parallel to each other and if you look at the price range of the Nasdaq over the last 4-6 weeks you will see it has been trading in a range (up one day, down the next). So, in my way of thinking there is no sense of urgency to get back into the market. Of course my thinking is also tempered by the overall miserable economy we are living in, but bear market rallies to occur and when I see a “spike” in the white line relative to the purple line I will get back into the market. I do think however, that the amount of money I invest will be on the more conservative side.
As I have stated on the main page of this blog I do not offer market commentary because who cares what I think and I am no financial expert. Of course compare my results for the year to the so called financial experts (those who manage stock mutual funds) and you will see that by and large I fared much better. But, does this sideway movement in the Nasdaq that we have experienced for the last month or so represent a bottoming of the market? Who knows? Maybe?
I am reasonably sure that fourth quarter earnings will be miserable, but that misery may already be built into the price of stocks. So, if first quarter earnings in 2009 are better than the previous quarter (even tho they are still poor relative to previous results) we may actually see some upward movement in the market later on this year.
For a complete explanation on how I determine when to be in the market go to www.low-risk-high-yield-investing.com
