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What to do now, sell more?

By Frank Stockwell

July 26, 2002. So you want to know if this is the bottom, well who knows. Historically the chance that one-day the market will turn around are pretty-darn good, but is this it? Are we at the bottom? Will the market go down anymore? You got to look at the facts before you run out and pile-on, so to speak, with all that hard-earned cash that you've been saving. You have been saving, right?

I could name many reasons that this isn't the time, nor the place (stock market), to begin or continue buying stocks. However, there are always stocks to buy, even when the market is tanking you can find those nifty handful of stocks that will disregard what the broader market is doing and forge ahead.

The trick is to identify them. That isn't an easy trick. If you are a professional and buy and sell daily it still isn't easy. In fact, just look at the record of those funds, that'll tell you there is no stock that goes up without going down. I guess gravity plays a role here too..

What to do. Well, begin by determining the mood of the market. Market now is such a tangled mess you wouldn't think that it will ever go up. If the economy doesn't convince you, then how about all the companies that roasted the books. Not to mention terrorist attacks and the like. Turmoil in the world is pretty much at its worst. How much more bad news can there be? 

Remember the famous quote; "Buy on rumor, sell on the news". Well, we got a whole lot of news (all negative, mostly) and beginning to hear faint rumors of economic turnaround, and companies reporting not-so gloomy results, and more important, better forward looking statements coming from CEO's. Oh God.

There are a lot of things you can do to decide for yourself if the market is close to a turnaround, here are some.

Look for trend changes, like the Barometer shows you. More about the Barometer in another issue. You can put a ruler to a chart and pretty much see for yourself if the trend is down, moving sideways, going up, or breaking a trend. Do a chart on the DOW and NASDAQ and see for yourself. You can chart FUNDS in the same manner.

Listen to those reports from CNNfn, and CNBC about company buy-backs. If the company seems to want to acquire their own stock, that has to tell you something. Rumor has it (there's that word), some companies are beginning to register their buy-back.

When you think the bottom is near, don't go buy everything in sight, but find some good stocks or funds and dollar-cost average over at least weeks, maybe even months. Finding those stocks and funds can be as tricky as deciding when a market turnaround is at hand. You need to chart these stock/funds, you have found, with a little analytical help. That is, almost all stock charts come with analysis tools, such as MACD, price-channel, moving averages and such.

Remember, when you research a company, if you cannot understand their business and how they make their earnings, stay away from them.

Next issue I'll talk about the Barometer and how to best interpret the trends, resistance and support levels. The following issue we'll discuss how to pick stocks using analytical charting. 

Frank Stockwell is a contributing editor to Market-Barometer.com.

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