Fair Warning!

We all know that there was huge buying interest at the end of the day on Friday. Was this the bottom? Was this the start of the next Bear Market Rally? The Answer:

Achtung!

Above is the first song on Van Halen's Fair Warning Album. Considering the times we are about to face Mean Street might be very appropriate.

My feeling as I mentioned before is that it is way to early to call a bottom here. We still have no trust in the financial system (as evidenced by LIBOR and US lending rates) and we still have no idea what happens to this economy when the financial element hits Main Street with tour de force, and we still have not seen any stabilization in the housing market.

Could this be the start of a bear market rally? Maybe. However the charts have to support this. No question a lot of companies have been oversold. Some companies with very solid earnings potential have been hit hard because of margin calls and deleveraging. In the case of CHK the CEO had to sell most of his shares due to margin calls. A bounce may be likely. However... this is an unprecedented market. So much of the gains in stocks over the last 25 years was induced by credit expansion, easy access to money, and the desire to put this money to work in stocks. Turning off the credit tap may affect the desire and ability to buy stocks for a long time to come. My feeling is that it is a great time to make a list of stock buys right now. Solid blue chips with dividends, great companies like GOOG and AAPL, perhaps the Asian ETF FXI and some individual names like SDTH, may be worth looking at. However, as long as all the trends are down and every rally is immediately followed by a sell-off I believe being overly aggressive is a mistake. I am being very careful and using very small amounts of money and mostly paper trading right now. This is like no market I have ever seen and I'd rather miss an opportunity than be wrong.

I'm not saying this is 1929 but it is the closest thing we have seen in my opinion...
Check This Out on Catching a Bottom in 1929.


This video says it as succinctly and poignantly as any...




"The Yellow Rose Street Beat" is for Informational purposes only. It does not give investment advice.