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Bottom-feeding, Oh but Why?

Last night I turned on the 7pm CNBC show and listened to not one but two money managers make the case that October 10th was the low.

It would make me wonder if they have ever heard of momentum but in reality, what they are doing is finding confirming data in positions they already have. Our brains trick us this way and in order to not be tricked we have to know that we WANT the market to go up….but alas that is for another post. (check the emotions and decisions thread).

…which brings me to the point of this post – the old saying “the trend is your friend“. Can anyone anywhere make a credible case that we are not in a long-term downtrend? From a year ago October until just a few minutes ago we have continued to make lower lows….. so… why try to buy the bottom?

Sure there are bear market and snap back rallies but bear markets mean sell the rallies … not buy the dips! It ain’t pretty but it is what it is… don’t let your brain fool you. (and oh btw a good intraday tip – compare what the cash equity market is doing to what the futures markets are doing…. for the last year at least they have usually been ahead of “us”).

UPDATE 3:57 PM … at least for the short term, we have the definition of a reversal day (trade lower, close higher)… guess I only needed to send out that news note! … now, I hope no one fell into the trap that our brains are also vulnerable too – “listening to an expert”. I am fairly certain my note marked the bottom… guess that makes me an expert of some sort ;)

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This entry was posted on Thursday, November 13th, 2008 at 2:26 pm and is filed under “Locals”, Markets. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

2 Responses to “Bottom-feeding, Oh but Why?”

  1. Ben Padilla says:
    November 16, 2008 at 9:06 am

    The market continues to discount the uncertainty of our country’s financial situation. It now appears that government is poised to make even bigger intrusions into our lives with higher cap gains taxes, higher income taxes, and more regulations. The engine of economic growth, small business, is being pulled apart as a result of these expected fiscal policies. The price behavior of the Russell 2000 index is a good proxy for the expected damage to small business. Technically speaking, if this index breaks last week’s lows, it has a price void to about 350, which is about 18% under the close of 11/14/08. So if this is a bottom, I will let someone else’s money tell me that.

  2. Jeff Wagner says:
    November 13, 2008 at 9:10 pm

    a 6% jump in the last hour…. I would say a few people must read this blog. ;)
    But if that last hour wasn’t “emotion”, I don’t know what is!!