Mike Rivers' Blog Headline Animator

Friday, January 25, 2008

"Hey, the market didn't do too badly this week...maybe the worst is over..."

You keep telling yourself that if it makes you feel better.

The market moves in fits and starts.

During a bull market, as prices go up, there are periodic sell-offs as some people take profits. Then, the market resumes its upward path.

The same is true during bear markets. As prices go down, there are periodic run-ups as bargain hunters buy and short sellers cover their shorts. When the bargain hunters--who are a small minority--and short sellers are done, the market resumes its downward path.

In my opinion, that's all that happened this week. The Fed's reaction (more accurately: people's reaction to the Fed), bargain hunters (all 12 of us) and short covering led the market to remain roughly flat this week.

But, that's just a temporary reprieve. The fundamentals behind the market haven't changed. The housing market is still going downhill fast, with no end in sight. Credit markets are still tight. Banks are still struggling to rebuild their balance sheets. Bond insurers are still in trouble. Employment still looks weak. Retail sales are still poor. Industrial activity is still slowing. The fundamentals haven't changed one iota.

In my opinion, after this "clearing rally" is over, the market will resume its downward path. And, I think it will take years to hit bottom. In the meantime, there are a few great bargains to be had out there, and I've been selectively shopping and buying.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

No comments: