DOW -515 (-4.09%)
S&P -77 (-5.5%)
NASDAQ -99 (-4.1%)
RUSSELL -31 (-4.5%)
THE STORY:
Last week I talked about the credit and housing problems that are taking quite a toll on the market. I also said that it would take time to finish out the cycle (months... or years) and that no amount of rate slashing by Jackass or any other program would help. This, I would love to brag, was proven today as President Bush delivered a message to the press about a $145 billion "stimulus plan". As the speech began, the DOW was UP about 180 points. By the time the speech was over, the DOW was in negative territory and eventually closed down. It is pretty clear that the institutional money managers understand the limitations of governmental ability to force economic change.
We also received another "shoe drop" this week as Citigroup (C) wrote down a $20 billion loss, which turns out to be the largest loss in history for a bank. Also, large bond issuers are being investigated. Here are the nuts folks: the earnings reports and economic releases that have been coming out so far this year have been met with tags like "...hasn't been this bad since 2001" or "...our largest percentage drop since 2002".
Given the fundamental parallels to the 2001-02 and 1987 bear markets, the following are bad ideas:
1) Trying to pick a bottom.
2) Listening to Jim Cramer.
3) Watching CNBC.
4) Reading analyst reports.
Ignore all that shit. They are going to fill your head with "its at a great value now" and "we may have found a bottom". Yeah, just like $90, then $75, then $50, then $5 was a value for Enron. They tell you to buy the shit because they need someone to sell it to.
Next week, keep an eye on Legg Mason (LM), Myriad Genetics (MYGN). Both of them have created pretty strong levels of support ($68 and $44 respectively). They are also forming some text book descending triangles. Be patient. Wait for the break. Then short the shit out of 'em. Remember those gold (GDX, GLD) ideas as well.
Lastly, if you need A REASON TO NOT LISTEN TO ANALYSTS, I present: Harley Davidson (HOG).
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