November 30th, 2009

2009 Rewind: Part 2

As you read this, my wife, our dog, and I are cruising down I-95. In the meanwhile, I thought you’d be interested in highlights of just a few of the 157 posting so far this year (there were 259 postings covering the difficult 2008 crash). This is Part 2 of a 4 part series.

March 19, 2009: The Debate is Settled: The Market Has Hit Bottom

“The raging debate is whether the market has hit bottom. My unconditional answer is ‘yes’….I’m not clairvoyant but the market is. Market prices have taken all these risks into consideration today or, more correctly, the millions of investors, large and small, have factored these and many more issues I haven’t even thought of into consideration and determined that stock prices will more likely move up than down in the near term. When prices move up too much, investors will stop buying and some might even start selling thereby ending the advance.”

My conviction that the market had reached a bottom was based less on a top-down than on a bottom-up approach. Since the previous November’s “Lehman” low, I started scanning individual charts to see whether some had halted their declineswere gaining support due to their low prices and . Many successfully resisted the market’s second decline in March and failed to make new lows. It appeared that some stocks were attempting to form reversal chart patterns.

I posted a spreadsheet in this post of 60 stocks I felt had formed and were breaking out of basing chart patterns (the list was expanded to over 200 in subsequently posts). Most did follow through with their break out and proceeded to lead the recovery bull market move. Some didn’t, however, later retreating back to the March 19 levels.

April 17, 2009: The Next Industrial Revolution

“We often use metaphors when describing challenging situations, so what we’re facing as the world economy resumes its forward momentum might be considered a “World-wide Industrial Revolution”. The first was in Great Britain as factory production began displacing independent trades people. The second was in the US and Europe when technological and economic progress gained momentum with the development of steam-powered ships, railways, and later in the 19th century with the internal combustion engine and electrical power generation. The Internet Age might be considered a sort of Industrial Revolution. The next could be the industrialization and “consumerization” of the rest of the world.”

Since the article, the S&P 500 Index has increased 28.10%, a respectable Bull Market but our standards. But the U.S. market continued to lag the rest of the world, except for Japan (10.76%):

I concluded the article by writing “This coming Industrial Revolution will be about the rest of the world gaining closing the gap….We’re going to hear a lot more again about resource shortages, escalating commodity prices and booming international stock markets. If you don’t feel comfortable buying foreign ADR’s, you can participate through the foreign market ETFs.”

I followed this up with several more articles about foreign markets, including one entitled “U.S. Stocks: The World’s Laggards” in which I wrote “In the meanwhile, while your waiting for the US market to signal a green light, take advantage of the new, wonderful tools created by those mad financial inventors. Put some money into foreign ETFs (also look at foreign currency ETFs -FXA, FXF, FXC, FXB and UDN – they’ve formed reversal patterns too as the $US has started to decline in value against other currencies.)”.

Even though I believe foreign markets, especially the emerging markets of Asia will outperform the US and that is some place I want to have a chunk of my portfolio in, I also believe these markets have run up too far, too fast they may be in the throes of a brief correction.

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