CHESSNOID

The stock market has been very volatile to say the least. Today was no exception. It went from one extreme to the other. Actually 2 days basically the same. Down a few hundred points at the open and choppy throughout the session and then strong close. I actually like this market because it has been helping me make money. I will continue to trade a small part of my portfolio in it and focus on the technicals.

The federal reserve did make the emergency interest rate cut and I am sure that made a difference in the short term. This stock market would have had its worst week without the intervention. Long term I can not gauge its true impact. Basic economics would say this should stimulate borrowing and spending. I am skeptical because the current environment we are in was caused by these same actions about 6 years ago, when Alan Greenspan made many interest rate cuts. The difference was home prices were not inflated at the time. This time they have not come down to where most average income families in America can afford the monthly payments on a 30 year fixed mortgage. At least not in my neck of the woods. Also the demand for loans has probably increased, but I don’t think the number of qualified borrowers has increased. My guess is that it has actually decreased because the special loan products that existed yesterday are gone and nothing has really replaced them. On the other side of the loan equation, I think lenders are being more strict on approving loans to make sure they avoid future losses and maybe going to the other extreme.

I really think the business cycle just has to play out and excesses must be squeezed out of the market. I do like the fact the federal reserve is trying but they need to be a leader in the financial field and not just a panicking reactionary group. When all the global stock markets lose 5-10 percent in a day, an emergency rate cut made them look more panicked and contradicted what they said less than 2 months ago.

The only thing that is going to get us through the recession is time and stopping wasteful spending on our resources. I haven’t heard the main news media talk about it yet, but it is obvious the literal billions of dollars we are spending in Iraq is bringing our country to its knees in the form of a recession. Of course, those who are satisfied with Bush’s performance thus far would disagree with me and probably think there are actually still WMDs in Iraq and that our economy is doing fine.

The market closed up today but the market trendlines are still pointing down. This is an observation and not an opinion, and for those who are good in critical thinking, you can see there is an opportunity to make money in this volatile market. I am definitely a novice, but I am up to 125 % return on my initial investment in 2 months based on those trends and technical analysis. All of this research is available online with the final decision to make money up to each individual.

More than 90 percent of my portfolio is in money markets. I am still conservative and focused on preserving my dollars. I was a dollar cost averaging investor for the last 10 years which is what I learned in college was the overall best strategy. I still agree with it, but I think when it is obvious the market is going down, you don’t have to average down and let your entire portfolio go down in value. I decided to cash out and lock in my gains. I will begin dollar cost averaging in bank, real estate, and technology stocks in probably about 2 quarters from now or whenever the technical indicators start flattening out.

It is true now that the rates have been cut and maybe cut again at the end of the month and next few months, banks will be paying less but that is s still better than having your stock investments go down 15 percent like mine would have if I didn’t sell last year. That basic principle of buy low and sell high still applies today. It is just hard to figure out when to do it.