Small Cap Network Blog

Well, a few months ago I never thought I’d see it. Since September though, I have to confess I’m not totally shocked. On Thursday the market fell under - and stayed under - 2002’s lows. We’re now back to where we were in 1997. Buy and hold anyone?

The bad news is, that’s 11 years of wasted time, if you were hell-bent on buy and hold. If you were willing to take profits, and make an occasional bearish bet, you’re probably still ahead of the game. However, odds are you were still adversely affected by more than a little bit.

The good news is, if you didn’t put one penny into the market but know that you should have over the last decade, well, you’re essentially ‘caught up’…. and I’m saying that with complete seriousness. You can start right where everybody else started a decade ago, since they’re back at the same starting line.

Anyway, I came here to talk about opportunity, and reality.

I know the tumble to new lows is supposed to be wildly bearish, and maybe it is. However, there’s that voice in the back of my head that keeps reminding me that the harsh move lower may well have taken out any remaining stops. In a sense this could cleanse the palette so we can finally just get the capitulation under our belt. I’m not saying today was it, but let’s face it - what is there left to prove? How much worse does it have to get? Everybody about as busted up as they could be.

Investors have also been filling up the sidelines for weeks now, holding lots of cash, and adding more and more as time passed. I believe cash positions were greater this time around than they were in October of 2001. Frankly, I’m surprised anybody had any stocks left to sell… but, we’ve transacted tons of them the last few days. Where’d they all come from? Wow. There can’t be much left to sell.

The point is, I can see the market sinking to new lows just far enough and long enough to convince everyone to dump anything they’ve got left, only to set up a major bounce. As such, I’m wondering if we need to take a swing on a bullish trade. I don’t know if it will be the beginning of a new bull market, but I think it could still be a nice upside move … if only because nobody expects it.

I don’t know - maybe the gears in my head are just spinning really fast right now. Look for more thoughts on this potential trade tomorrow.

Did you know there are some thoughts and comments that only appear in the e-mail version of our newsletter? That’s right - if you’re just reading the blog or the online version of the newsletter, you’re not getting everything. Be sure to sign up for it today.