March 13th, 2009

8 Hurdles to Cross

Don’t know how many of you caught the Jon Stewart/Cramer bout on The Daily Show last night (it’s available, with commercial breaks on – if their servers don’t crash because of the overflow traffic) but it was truly amazing. Many of Jon’s audience also watch Cramer (as do I) have been burnt by or feed up with Cramer’s unprofessional and biased reporting, as evidenced by the reader comments.

Perhaps one place to begin in CNBC’s becoming a more balanced reporting organization is to get off the “turnaround” and “bottom” steamroller. Come on guys, if you’re going to report about the market going up 10.9% over three successive up-days, you need to put it in the context of it’s 27.6% decline over the previous 2 months. The 3-day bounce represents a 28.7% recovery of the previous decline, significant but a long way to go before popping corks and signaling an all clear. [My candidate for the title of “Chief Agitator” isn’t Cramer, it’s Kudlow! He has no business being on CNBC or any other news network.]

All those “talking heads” can be excited about perhaps not having to read all those bad news headlines but they should hold their personal emotions in check. As Jon posits, individual investors are looking to CNBC to be news and information presenters not cheerleaders in a sporting event; we aren’t spectators, we are participants in this survival game.

In that vain, I mentioned in many previous postings that base-building is a long and often frustrating process entailing false starts and disappointments. I was personally disappointed, for example, when what I thought was a symmetrical triangle marking a reversal actually turned out to be only a continuation pattern. If that’s the case, the 28% move out of the triangle so far is less than the 40% percent decline into the triangle meaning we may have another 10-15% down to go from that 934 top to 560!

So before we fall all over ourselves buying into the hype, I want to drill down to the sorts of hurdles the market needs to cross above before the all-clear can be issued, before the market issues an indesputable signal that it has moved through the base and into a new bull leg. Those signals are:

(BTW, I posted this on StockTwit earlier.) Yes, there are no less than 8 hurdles that the market needs to cross on the way into the Home Stretch; the exact levels of these hurdles will change as time goes by but their existence won’t disappear. These are benchmarks and each measures progress towards completion of the task (of Base-building).

We can talk about stock picking but all of that is moot, if not suspicious, until the market moves into a clear uptrend. I’ve used the ability of individual stocks to cross their own moving averages – my own internal measure of the market’s general health. I can report that while the Index is below the January base level, the number of individual stocks remaining above their moving averages hasn’t deteriorate much:

This is all hopeful ….. but. My advice is consistent with what I’ve saying for over a year. Don’t get carried away by Cramer, Kudlow and Company’s euphoria on CNBC. We’re not out of the woods and there’s a long way yet to go. You’ll read about it here when I think we’ve finally arrived.

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