The Fat Lady Hasn’t Sung Yet!

08/20/2007 12:00 am EST

Focus: MARKETS

Mike Turner

President, Mike Turner

Grateful for the upswing in the market at the end of the week, but not yet jumping in with both feet, Mike Turner, president of TurnerTrends, tells why he's still skeptical.

It was good to see the market rebound on Friday when the Fed lowered its target rate and eased its monetary bias. I am not at all sure, however, that the easing Fed monetary policy is enough to keep some banks, mortgage companies, and a lot of hedge funds from going bankrupt... I am not ready to say we saw a bottom in this correction. If it wasn't, I suspect we are very close.

And I'm not convinced that just a Fed easing is all that is needed. The Fed did nothing to remove the sub-prime issues. I am afraid it was just swept under the rug and will resurface.

Emotion, in the form of 'hope', is telling a lot of investors to get back in the market... the worst is over... start buying all the bargains. But, my data tells me that there could still be some serious volatility in front of us. Since hope is a terrible investment strategy, I choose to go with the data, which says either be short or mostly in cash for at least one more week.

So, my plan is to pick up a couple of inverse ETFs and stick with only Strong Buy rated stocks... but, mostly, just continue to stay in stocks; and be no more than 20% invested in the market.

My goal is to let the market tell me where it's headed... then, simply follow that heading. I want to buy only those equities that the market will support and that will appreciate in price for as long as demand for shares in those equities is greater than the supply. Then, when that cycle ends, I want out... and then look for the next equity that has a demand/supply curve that favors an increase in share price.

My Bull/Bear Rating is definitely in Bear mode right now, at the lowest level of a [-5]. The ratio of new Bear signals to new Bull signals was a whopping 7-to-1 in favor of the Bears, based on this past week's investor trading sentiment. The data represent the strongest Bear market indication that I have had since I started collecting the data! Of course, this could be a sign of capitulation, which is indicative of a market bottom. It will not surprise me if we see last week as the low-point for the year. But, since the data are so strongly Bearish; I will remain skeptical of a market bottom, and stay mostly in cash, meaning that I will stay at 80% or more in cash for the upcoming week.

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