Update from the bottom

You probably saw the stock market rally again today, yes? While it seems as if there is still likely to be bad economic news on the horizon, it seems as if the majority of that bad news has been baked into the financial markets. So I wanted to update you on my having said on November 25th that I thought a bottom had been reached 3 trading days earlier on November 20th.

On November 20th, the major stock market indices had the following closes:

• DJIA: 7,552.29
• S&P 500: 752.44
• NASDAQ: 1,316.12

Those closing levels remain the low and I still stand by the call I made on November 25th. I made that call after the markets had rallied for three consecutive days, and on the final day, the day of the blog post entitled “up, up and away,” the markets closed up even though there had been bad news that day. So what have the markets done subsequently?

Today’s, December 16th’s, closing prices are as follows:

• DJIA: 8,924.14
• S&P 500: 913.18
• NASDAQ: 1,589.89

That represents appreciation from the bottom of:

• DJIA: 18.2%
• S&P 500: 21.4%
• NASDAQ: 20.8%

Not bad, huh? OK, but I made the call three days after the fact…so how would you have done if you had started buying that day – which would have been against my advice:

Close on November 25th, with returns subsequent to that day:

• DJIA: 8,479.47, 5.2%
• S&P 500: 857.39, 6.5%
• NASDAQ: 1,464.73, 8.5%

Obviously these returns are much lower than had I had perfect clairvoyance on November 20th. However, do you remember early on in the days of this blog I said that it is better to leave some upside on the table in order to ensure that you are unlikely to suffer more declines?

So what to do now? Well in the posting, “up, up and away” I said that it was time to start doing your research for where you wanted to invest. My advice now is to keep that up. Why am I not recommending that you buy quite yet? Because I’m nervous like that. I would be more comfortable if I felt that there was a full appreciation by market participants of the inevitable bad economic news out of China, Mexico and Europe. I am still watching. If you feel comfortable jumping in then please feel free. Just know that today I am patting myself on the back…hopefully not too gratuitously for your tastes.

Respectfully!

Jason