A few thoughts while watching Facebook trade below $29 (The stock reminds me of one of the bodies tied to the bumper of an old Buick in the opening credits of Magic City):
Market bottoms are typically a process and not just a particular point in time. After the sell-off we saw earlier this its normal to see the markets bounce around where there may be at least two visitations to the lows, if not more. As the chart below reveals, the red arrow indicates the low as marked by the indicators but that does not mean the investors should jump in just yet, time is necessary. The following green arrow shows a secondary low that is either close in value to the previous low or can come significantly below in a truly bad bear market. Typically the secondary lows will have significantly less momentum and thus offer a better potential entry point.
Since this process can take weeks if not months, we’ve raised significant amount of cash in the range of 50%. Our goal is to minimize risk and volatility during this unstable period by selling off either lagging or losing holdings and choosing to hold just our strongest performers. Patience is the key at this point and trying to force performance right now is a mug’s game.
The rationale for the weakness continue to be the Eurozone mess which is now focusing on the financial stability of Spain in tandem with the ever expanding mess in Greece. While the effects of the Eurozone mess are questionable in terms of their effects upon the US, investors are choosing to sell first before hard data shows otherwise.
This too will pass in time.
No positions mentioned.
Chart courtesy of Decisionpoint