Sunday, October 12, 2008

Is it right time to start buying?

Several stock exchanges posted the biggest daily and weekly declines in history. Most of the markets dropped 20% or more in one week. Long term LIBOR interest rates are still on rise nevertheless over night rate are already falling.Volatility index VIX jumped above 75. All this big fear is reflected in stock price. This global sell off is broad.There is no distinction between sectors related to economic cycle or recession prove sectors. Even defensive plays like health-care are posting sharp declines. Nobody cares about debt ratio or focusing on untouched sectors.

I don't expect "V" recovery from that point. In fact I do expect that markets can go lower. What we could saw on last Friday in US before markets closed trading. Dow Jones jumped 800 points in less than half an hour of trading. There is cash waiting to get in. Record VIX level or Put / Call ratio are monitored by all people. What I do expect is high range trading up and down. For this illogical trading the most punished growing sectors (like energy, technology) will bounce the most.

For the long term investing I wait for formation that history shows to be winning. If you checked the end of the last bear markets or Great depression there is always common sign of recovery. When indexes will form fresh low higher than previous low this will be the time to enter position for long term.


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