Is This a Stock Market Bottom?

Of course, you have heard the adage often attributed to Baron Rothschild, that the time to buy is when there is blood running in the streets. Nevertheless, you've also heard that the rich got that way by spending wisely. Therefore, given the landmark events of the past week, investors are wondering whether it is time to withdraw all their money from money market funds or plunge headlong into bank stocks. There is plenty of conflicting advice out there and a lot depends upon each individual's situation.

However, consider the following:

The liquidity panic and sickening declines last week were organic; they were the result of the free market functioning as it was designed to. In contrast, the rallies on Thursday and Friday were inorganic, or manufactured, since they resulted from sudden drastic measures taken by the US government in coordination with other nations.
You can lose a lot of money by plunging into the market in hopes of catching a bottom. The market runs on fear and greed on a daily basis but, panicky systemic runs on the "bank" as we experienced last week are a "once in a lifetime" event.
Much of the "smart money" was not buying because much of the "smart money" was preoccupied with filing for bankruptcy.

If you are a technical analyst, ask yourself if you have seen unequivocal bullish signals and trends or if you rely more on fundamental analysis consider balance sheet weakness, dismal earnings prospects and the general economic environment.

In the coming weeks we will see sessions of panic selling and giddy buying. Volatility is high. It is not much fun right now and you or I do not know when the market will bottom. Nobody knows.

We are the market and the market hates uncertainty. We hate uncertainty. A prudent approach would be to wait for certainty and stability to emerge. If the wait is too uncomfortable, you can try investing small amounts to test the waters. You will probably just be feeding the bears even with the federal muzzle that prevents the bears from dining on approximately 800 financial stocks.

Many assets are still overvalued, risk is being dynamically re-priced as insurance companies, and venerable banks fail. Capitalism will adapt and prevail. Stay nimble and good luck.

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