So far so good, but....
Market Update: 2008-07-21
Well, a lot has happened since the last time I wrote (less than two weeks ago!).
Last week we witnessed the BKX banking index spiral out of control to the downside, which suspiciously looked like the index was breaking support and planning to leave the key level at 60 above it. The BKX as of last Tuesday fell to a 46 handle, and then everything changed on Wednesday. By last Friday, the BKX was back above its key support level of 60, and it remained above 60 today. We came around the 65 mark this morning but ending up giving some back later this afternoon.
So, what do I think this means for banks? I wish I could say we have had a successful test of support and that the worst is behind us, but I am not convinced of that just yet. I would not be surprised it we continue to bounce up and fall back down for a while, possibly even for months, as the banks try to find direction. Actually I wouldn't be surprised for the BKX to fall back under 50 and test last week's lows again.
Bottom line, if you don't have the enough fluids in you to sweat out this wild ride, you should probably go ahead and take your money off the banks for a while because I would rather you not make money if we go up from here than to complain to me how much money you are losing if we go down from here. As for myself, I will buy more if we drop way back down, because I am actually probably the only person you will ever meet who buys a stock (or fund) and hopes it will go down more (at least in the short run). I love to buy cheap, and cheaper, so that I can make more money when the rally does come. And I am a very patient man. When I buy something I plan to hold it for 2-10+ years, and don't sweat short term price volatility or drops.
Finally, ITB, the homebuilders ETF, looks great. The longer it refuses to break below 13 (which was the January low), the more convinced I am that homebuilders have made their bottom. For now I will keep watch. My position in ITB is complete now, and I don't anticipate I will be buying any more (unless it really goes on sale). Good news is that if the homebuildering stocks are finally done falling and have really found their bottom, then I would expect that the housing market will follow within the next 6-18 months. Stocks tend to predict the future, and they appear to be predicting a bottom in housing not too far out from now.
We will know more later. Until then, Happy Investing!
Gregory
Well, a lot has happened since the last time I wrote (less than two weeks ago!).
Last week we witnessed the BKX banking index spiral out of control to the downside, which suspiciously looked like the index was breaking support and planning to leave the key level at 60 above it. The BKX as of last Tuesday fell to a 46 handle, and then everything changed on Wednesday. By last Friday, the BKX was back above its key support level of 60, and it remained above 60 today. We came around the 65 mark this morning but ending up giving some back later this afternoon.
So, what do I think this means for banks? I wish I could say we have had a successful test of support and that the worst is behind us, but I am not convinced of that just yet. I would not be surprised it we continue to bounce up and fall back down for a while, possibly even for months, as the banks try to find direction. Actually I wouldn't be surprised for the BKX to fall back under 50 and test last week's lows again.
Bottom line, if you don't have the enough fluids in you to sweat out this wild ride, you should probably go ahead and take your money off the banks for a while because I would rather you not make money if we go up from here than to complain to me how much money you are losing if we go down from here. As for myself, I will buy more if we drop way back down, because I am actually probably the only person you will ever meet who buys a stock (or fund) and hopes it will go down more (at least in the short run). I love to buy cheap, and cheaper, so that I can make more money when the rally does come. And I am a very patient man. When I buy something I plan to hold it for 2-10+ years, and don't sweat short term price volatility or drops.
Finally, ITB, the homebuilders ETF, looks great. The longer it refuses to break below 13 (which was the January low), the more convinced I am that homebuilders have made their bottom. For now I will keep watch. My position in ITB is complete now, and I don't anticipate I will be buying any more (unless it really goes on sale). Good news is that if the homebuildering stocks are finally done falling and have really found their bottom, then I would expect that the housing market will follow within the next 6-18 months. Stocks tend to predict the future, and they appear to be predicting a bottom in housing not too far out from now.
We will know more later. Until then, Happy Investing!
Gregory
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