As I have mentioned over the last few weeks, the tide has started to go out, the market leadership was getting narrower, the advance decline line was deteriorating, and the new-low list was expanding. Those are all serious body blows for a market to take. That is when the market becomes vulnerable for a head shot. I suggested we need to take advanced notice to get ready for a 20% sale on most company’s stock prices. The reason I am not worried is that much of the damage has already been done. And…I think a knockdown is coming, but not a knock out!
My guess is that by year-end and mid-year next year, most everybody will be surprised how high the market closes compared to their current fear levels. I think for the very short term though, we are getting ready for a scary move lower on the major indexes. Many small-cap stocks are already in their own bear markets. I suggested a few weeks ago when I was sending early warning signals out, and suggest again, that my guess the knockdown will present the opportunity for strong gains six-to-nine months out.
There is too much cash around waiting to buy the selloff, too much pessimism, too much bad news already creating fear to help counter the selloff. When the head shot comes, and I think it will come pretty soon, be prepared and ready to buy at your wishlist prices.
Longs- Gilead Sciences Inc. (GILD) , Omega Protein Corporation (OME) , Microsoft Corporation (MSFT) , Constellation Brands Inc. ($STZ)
Shorts- NetSuite Inc. (N) , Chico's FAS Inc. (CHS)
By Jordan Kimmel, Chief Investment Officer at Investview, Inc. (INVU).
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