GETTING CLOSE

I have not posted here in awhile for a few reasons. First and most important lack of feedback. I have stated often here that I would prefer comments vs emails to encourage discussion. Since that has not happened I do not feel compelled to tackle the technical challenges of making these entries. Satellite internet and it's slow speed make this very difficult.

Secondly, in this day and age where so many people read one article from someone they don't know, and then they are the expert on every subject on earth. I am seriously contemplating retreating back away from the public and just trading like I always have. At times it is just not worth the stupid comments that are made towards you. The most recent was the accusation of me getting killed because I am a long term investor. An average hold time in trades of less than 2 days and I am a long term investor being killed by this decline? Just read the last post and several before if you view me as that.

Now with all that aside, and referencing my last post where I thought the low would come in March, we can see that a potential low is in fact setting up here. The strong seasonal tendency for the decennial pattern to have March Lows, combined with the commercials stepping up their buying here, and interest rates tanking, is the perfect storm. This is setting up very nicely for a major rally. We will see how we look at month's end which is the ideal cycle spot, but it is sure looking good right now.

One more dip would be ideal, but we do not always get what we want. FYI, this particular setup is actually a buy and hold for about 6 months when it goes unlike most of what I do.

Without having posted anything for awhile, there is some catching up to do.

First, the year end rally at the end of 2007 did not materialize which led me to exit the long side on the last trading day of 07. I felt that the weakness during that very strong seasonal period was a warning of things to come. There are times when you have to make judgements regardless of what your systems are telling you.

As we are now in free fall, with the commercials heavily short, and in a seasonal down time period, is there any reason to look at buying this dip? As I type this the globex S&P session is down a staggering 52 points during this holiday. Whether or not this is a buy is up to an individuals trading or investing view. As an investor, stocks are clearly on sale here being undervalued by a number of measures, in particular, vs bond yields. It is at these times that you simply must put money to work, but also not to expect immediate gains. Investing and trading are two different approaches. As I have stated all along, the end of the first quarter is where I was looking for a low to be formed, so we are a ways from that as traders but not as investors.

From a short term trading perspective, the market is severely oversold and these types of declines have to be bought into, but timing them is difficult. First, your stops need to be much wider than normal to adjust to the volatility, and second, your size needs to be smaller for the same reason. I do not look to make a killing during these periods because that is how you get blown out. I want my risk to be the same during all market periods for consistency. That means trading smaller size with wider stops.

If the market does gap down to the degree that globex is indicating on Tuesdays action, that is an opening so extreme that it is a buy in my view for a short term trade. It is completely counter trend, but it would represent a several standard deviation move, that statistically is probable to reverse. However, overall I think we will trade down for the next week or two, then find a meaningful short term low, work into a more significant one in March, then head upward into the end of summer.