Tuesday, August 9, 2011

S&P Master Chart

We are in interesting times and the point of recognition has been reached.   The internals of today's decline was one of the worst on record.  We have entered period of liquidation all when a time cycle is approaching for a temporary bottom. The technical damage has been done and it will take TIME to repair this market.  The next recovery in the stock market will be on of confusion but that maybe 6 to 18 months away.  The economy will remain week and muddle along but there will be point where we see the stock market outperform the general economy similar to the 1932 to 1937 period where the stock market rose over 200%.  Before that happens we are going we see huge volatile days such as today to the upside and downside.  The damage today is significant and the recent decline may have reached its half way point in price but not in TIME.  Dollar Cost Averaging into this environment over the next 12 to 18 months would not be a bad idea but you always want to be sure you are averaging into this market when we have large down day's.  As well you want to be positioned in assets that lead the next wave up.  Understanding the dynamics of the world economy and future growth will help you be positioned properly.   It may feel like the end of the world but the problem is debt and it can be fixed with TIME and tough decisions by government.  Our problems today are peanuts compared to getting through 2 World Wars where tens of millions were killed countries were destroyed.  The charts are the key to help us navigate through this most emotional time. 

Attached is my Master Chart of the S&P500.  We are at a confluence area of many support levels.  If we get a monthly close or even a weekly close below 1040 we will most likely see triple digit figures sooner than later.  It amazes me how the so called experts continue to get it wrong and how we are at last years lows already.  It was 3 weeks ago where the majority of experts were calling for higher prices.  

We are in interesting times however over the next few years we may witness the last great investment opportunity of our generation.  Complacency is not an option and being dynamic with your allocation is necessary for expected returns.