Experts Will Be Dead Wrong Again

Remember this when in a year or two the markets are much lower. Right now, many so-called experts are telling people to buy the dips, maintain the course and hold on for dear life. Wrong advice from where I sit. I am NOT an expert and do not make that claim. However, with the recent volatility and movement in the stock markets, things are in the process of changing. This is no longer a straight ahead, no limits, bull market. If it were, we would not be having 387 point sell-offs as a matter of normal trading.

Face the facts. This bull market has lasted nearly 5 years. Longer than most in our history. Also, there is perfect reason to be concerned about the housing/mortgage debacle. With all the excess derivatives compounded upon each other, it is impossible to know the extent of how valuable or not something is. Companies are buying back shares furiously in an attempt to buoy earnings in the coming quarters. If things were so great, they would be plowing most of this money into new equipment, upgrades and expansion. Buying back shares does nothing to create new business or new jobs.

Consider that energy prices and inflation are still high. Forget skewed government statistics to the contrary. What matters is how much you are actually paying for goods and services in your own personal life. What the government proclaims is of no value to the average consumer. The government and the FED are out of touch with reality. And they usually are when things begin to change. Do we need a rate cut? NO. A few rate cuts will not stave off the coming turn down in the economy. And several rate cuts will force inflation even higher as well as re-liquefy the markets. Part of this problem is that there is a worldwide liquidity bubble. It is in the early stages of bursting. What kind of destruction this causes is relatively unknown. You can only guess as to how far the damage will spread.

I think the markets are headed lower after this recent rally. They might temporarily hold as a retest of the recent lows and try to rally again. The Bulls are a stubborn lot and will only give up at major bottoms. This is an established fact. Face it folks. We are headed much lower despite what the feel-good experts say. They don't want to sell when prices are falling. They do want to exit when the unsuspecting trader/investor is buying the dips and hoping for a renewed rally to new highs. Fat chance. The pros will always hype up a falling market so that they can get better prices for their sales. Who ends up holding the bag? The players who refuse to believe they are being taken to the cleaners. Look at the charts over the last 130 years. You see this happen all the time.

We are heading into September-October and the fireworks should be explosive. Last year, we plowed ahead during these months. This time, they will return to form and leave many a trader/investor exasperated and confused; to say nothing of being upset and angry. The investment rate, Gann analysis and the year ending in 07 all weigh heavily against the market. My bet is on a possible crash in the near future where we see the Dow down some 600-700 points in a day. Not to be negative or a super bear, but as you have seen over the last month or so, reality is catching up to the sleepy Bulls who have been lulled to sleep once again. You have to go where the easiest money is to be made. And right now and for the foreseeable future, that is to the downside. Buy call options for quick reversal rallies, and buy puts for super quick downside sell-offs that take your heart away. Let the games begin and may the last Bull not loose everything.