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« April Employment Report Preview | Main | Investor Question »

May 06, 2010



Curtis -- IWD is a good example. It traded at ten cents! My point is that you need to have your own valuation for each stock.

And then still be very careful!


Curtis White

You lost me here:

Lesson #3. ETF pricing was completely wrong. Anyone trying to trade ETFs without a sense of the fundamental values was completely shooting blind.

Market valuation does not help you. I wrote about the subject last year at the market bottom. All of the "trailing earnings" methods will not help. Focus on individual stocks -- specific names. There are many exciting choices that have little or nothing to do with Europe.

Mike C

Quick thoughts/comments:

1. Great stuff on the lessons, especially #1 and #2. I'm hearing some real horror stories that could have been avoided with your points on 1 and 2

2. Got gold (rhetorical)? Gold up big today. Today is the kind of day I'm sure glad I got a long-term 10% allocation to GLD. Good diversifier to these sorts of panic situation.

3. To point #1, the last 14 months have definitely been great, but my guess is most long-term investors are still below the high-water marks of 2007. I think it is reasonable to point that out in the context of long-term investing and the gains of the last year.

The specific timing of corrections to the day and week are inevitable, but the warning signs have been there now for awhile. Technically, the market has been extremely overbought for the last 1-2 months and sentiment excessively bullish as measured by AAII, Investor's Intelligence, record low put/call ratios and speculative call buying, etc. which is definitely the combo for a rip your face of correction out of nowhere. I had been selling equities considerably the last 4-6 weeks based on that. I'm looking to reload, but I think a full retest of the 200 DMA is coming. I think we need to see bearish sentiment spike up to really set up a tradable bottom.

The million dollar question on my mind is does today's action point in the direction that just about everybody is playing technical upside momentum here with one finger on the sell button if it looks like this rally is ending. In other words, are the majority of longs here stock "renters" or do they really own what they think are good long-term "values"? I'll readily admit I'm in the former camp here which is disconcerting because if and when numerous technical levels break, you might get a mad rush for the door simultaneously with no buyers stepping in until we really hit value levels like last March.

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