Bill Cara: Everybody has taken the day off, Thurs., June 8, 2006, 12:15 PM

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June 8, 2006

Everybody has taken the day off, Thurs., June 8, 2006, 12:15 PM

Yesterday I switched the script for date-stamping my blog articles, and did not notice that the dates for the first six articles I wrote and published earlier today were incorrect. Of course, the auto stamp at the bottom was correct.

So maybe in my mind I was taking the day off.

The Dow was down another 170 points, down to 10,760 a couple minutes ago as I started to type. That is another scare " the market as well as my typing.

I believe still -- as I have believed for about a year -- that the Dow index would bottom at about 8,800. So we have a ways to go if my forecast is correct.

At about 8800 on the Dow, the PE multiples of the key stocks will be back in sync where traders can once again stop talking about momentum trading, and get back to conventional analysis of fundamentals, quantitative metrics, and macro-economics.

When was the last time you watched a Talking Head work through a legitimate analysis without telling you how the Fed Governor or the Treasury Secretary was going to react?

During this process of decline, I suggest you stop trying to pick cycle bottoms, and start compiling a lengthy watch list of companies whose stocks you'd be prepared to buy under any circumstance in capital market prices. I have done that for myself; I recommend you do it for yourself " for your own needs and interests and time and money resources.

You need to get off somebody else's schedule and onto your own.

That way when you decide to take a day off, and can't seem to get the date correct, it is not the end of the world.

Maybe now with that new pair of Footjoy golf shoes she gave me after her golf tournament yesterday I can get out to enjoy the other links. Those shoes are kinda tearing up the hardwood in here. Besides that Footjoy Cabretta leather glove that came with the shoes may be nice and soft but it's making a mess of my typing.

My typing is real bad today.

Posted by Posted by Bill Cara on June 8, 2006 12:15:06 PM | Category: Cara Today in the Market

Discourse

Bill, you say you expect the Dow to be around 8800 *at* year-end (I think you said "at" rather than "by"). But do you also expect the actual bottom to be earlier (say, October), so at this bottom the Dow would be much lower than 8800?

Posted by: tc at June 8, 2006 12:24 PM [link]

Nevermind, I looked back at your post and a few old posts, and you clearly refer to 8800 as your expected bottom. I just seem to remember you saying something like 8800 *by* year-end in some old post.

Posted by: tc at June 8, 2006 12:28 PM [link]

tc,

Please don't try to over-think things here. I did say that I believe the Dow would fall to about 8,800 (or maybe 8,200) and I have written that this is tea leaf reading.
http://www.billcara.com/archives/2006/06/where_to_this_b.html

I also did say (you are correct) that my best guess would be a 2006 close at 8,800. That was the time a week or so ago I was commenting on the prediction by Barry Ritholtz (in the Business Week article) that the Dow would close the year at (I think) 7,000, and most of the Street was well above that, and above my number.

But don't get me going on Ritholtz again.

So to try to straighten out something that is going to stay warped anyway, let me say that I believe the cycle bottom will occur in the next four months -- probably October -- and that I hope to be trading in Bahamas the day the market hits a low.

That way I can wave to all those unfortunate souls who are grounded in their own reality that I was there at the right place at the right time, and that it was no random walk (or flight) getting there.

LOL

Posted by: Bill Cara at June 8, 2006 12:43 PM [link]

I need a month off . Soccer World Cup starts tomorrow. Is there any correlation between soccer world cups and bear markets ? Last World cup summer of 2002 saw a plunge in the market. Maybe everyone liquidates and takes the month off ? After all over 2 billion people the world over follow the world cup. Many I'm sure are traders.

Posted by: TheAdonis at June 8, 2006 12:45 PM [link]

Bill

Yes, here is the correct spot. Great caution from you, Bill, on picking stocks for accumulation, not obsessing with cycle tops and bottoms. I fear some of the newbies will get real aggressive with puts and calls, taking their cue from your more experienced commenters. If they hit, they mistake dumb luck for skill, and if they miss....well, they really get hurt.

My shorting skills are lukewarm, and I avoid puts and calls, as I don't understand them (not to say that I don't know what they are) and now is not the time to learn.

Thanks

Posted by: tom sheepngoats at June 8, 2006 12:53 PM [link]

Bill,

Thanks to you, I think I am starting to get it. Tomorrow being Friday, I should expect to see a rally but one without legs. The Gnomes ( sell-siders ) will be out in full force unloading what they can of their inventory onto the Little People and the markets will look robust going into the weekend. A week from now, we will see continued weakness as the malaise of summer sets in. Everybody is tired and nobody is really bullish and there are no new lies that we haven't heard before. I'll keep my eye on those I like, watching volume and price action relative to broad markets, indicies etc. A 8800 Dow by October may be a stretch, but accumulations in the single digits is worth waiting for. Thanks again for your timely advice. You have saved me and my clients a lot of hard earned money.

Posted by: TerryC at June 8, 2006 1:43 PM [link]

So, what's supporting this market here? I can't believe the individual investor took a look around at the global markets and, with the Dow down 175 this A.M. and continually down over the past few weeks, suddenly said "yee-haw, that's it, that's the the bottom... I'm in." It ain't the fund managers. So, who is it? Who's providing the support, and how much ammunition do they have?

Posted by: Joe_Blow at June 8, 2006 2:49 PM [link]

Theadonis

Check with UBS on the Bear/World Cup correlation as they have used their analysis models to predict that Italy will beat Brazil to win the cup!

GWUK

Posted by: gwuk at June 8, 2006 8:51 PM [link]