10.10.08 Nightly Market Thoughts

(two days late)

I was looking for Friday to be capitulation day (at least for the short term). I am putting it at better than even odds that it was such a day. Just when I couldn't imagine fear becoming much worse, it did exactly that. At about 3 PM, just before the snapback rally, my subjectively appraised nadir of sentiment occurred on various internet forums I visit. Perhaps the quote "It's darkest before dawn" carries some truth. Then again, it's also darkest before the world comes to an end.

Some quotes from message boards I read:

  • "One of my neighbors dumped ALL of his stock yesterday... "
  • "I did [the same] early this week"
  • "Just sold all my TDAmeritrade positions... I can't take anymore of this... Lost 40% on my portfolio. There is still way to much uncertainty in the market and there is no telling where the bottom is. I'm keeping all my 401k stuff as is since I dollar cost average all of that. But this is just getting ridiculous. The problem in the market still hasn't been fixed and won't get better for another two years as I see it. I'll put my money back in once the market gets confidence back in it."

The quotes sound like classic J6P capitulators: selling at bottom, waiting till the market goes way up ("gets confidence back") before buying back.

The snapback rally in the last hour was breathtaking (as was the volatility in the beginning of the day). The DJIA went from just over 8000 to nearly 8900 in about 40 minutes. That's over 11% in 40 minutes (as in index!). I've never seen anything like it. To put this in perspective, that's a year's average historical return in 40 minutes of trading. When we finally have our exhaustion rally, it will be similarly powerful.

I'm pretty much all-in as of the close on Friday. If the market keeps going down, I'll have to raise more cash somehow.

A few people on the finance forums I visit are calling for a crash tomorrow. That could be the very skepticism that fuels a rally. When the rally comes, few will believe in it. The market will climb the wall of worry. When enough people finally believe it, these lows will be tested again.

I'm just a penny on the train track
Waitin' for my judgement day
Come on baby girl let me see those legs
Before I get flattened away...

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Just sold all my

Just sold all my TDAmeritrade positions

Sucks to be him. So close on the 1000 point day!

Good Call

I moved in about 40% today.