Thursday, October 30, 2008

Finding the Bottom

There is only one cause that brings the bull market to its knee, which is when companies doing bad or the entire economy is doing bad.

That was easy, we can tell when we reached the peak and get out before the big crash (down 40%) but what takes the stock market out of the bear market? To make investing life simple, I want to get the clear clue. The simple answer is when economy starts to turn around. That’s true, but we will be way above the bottom. So it isn’t that useful.

If I look back at the peak of the bull market, people ignore all the fundamental and buy whatever the media suggest. So, same scenario for the bear market is the capitulation point where people sell regardless the fundamental. The bottom should be at the maximum fear. That’s when the economy seem like it will never recover, we will never get any job, business revenue will keep losing.