FOOLS…DAMN FOOLS
There are a chorus of individuals, strategists and money managers who are telling a story of last night's downgrade of US debt being the capitulation type event that will lead us to a sustainable bottom.
Any of you who have been following my thoughts and opinions for more than a week know that I will be the first in line with a list of reasons to be bullish on US equities. I am very bullish on US equities for the long-term, as you well know. However, now is not the time to buy into bullish scenarios of any type. Especially one that has us bottoming on the downgrade of US debt by S&P.
The downgrade will have reverberations through the global economy that will trickle out slowly over the next few weeks and months. It's not something that will easily be digested, causing the type of spike down and subsequent move up that marks a capitulation bottom.
I recall vividly the same type of capitulation scenario being talked about during the Lehman bankruptcy. It turned out that we had months of work ahead of us for the markets once that event came to pass. This will be much the same. While the economic ramifications of such an event are much different than Lehman, the psychological effects as it weighs on confidence will be very much alike.
There will be spikes up along the way. You should use them as an opportunity to raise more cash. There will be tremendous buying opportunities ahead during the most frightening of times. The ammunition needs to be there to take a shot.
I'll be putting together a review of a few charts later today or early tomorrow morning. I want to keep it short this week as the technical picture is going to be thrown out of the window. The 1160 to 1250 range on the S&P look like where we should stay for the near future. Below 1160 and things get very ugly, very fast.
That's my opinion during this difficult time. More later.
