Sunday, June 21, 2009

For GT Blog June 19, 2009

Let’s listen on a broker advisor & client conversation

Client: How come we are still sitting in cash when the market has been going up since early March? I recall your slogan is to buy-hold and sell, and know when to buy again.

Broker advisor: Our models tell us this a bear market rally and that we will correct down to re-test those March lows because there is no leadership to sustain the advance.

Client: No leadership? How come the Nasdaq is up 50% from the March lows?

The client remembers when the North American tech sectors had a big growth spurt through the 1990's with the group building an exponential price spike in early 2000. The prime driver was the spending boom stimulated by the Y2K fiasco. Remember when all tech driven devices were to stop at New Years Eve 1999? PC's were to explode and planes would fall from the sky.

What we did get was the great 2000 - 2002 Granddaddy bear that introduced a secular down trend in the technology sector which is still in place. Nortel stunk up the space and investors moved on to the income trust sector only to get burned again. Now we all want to own energy and potash stocks - the ownership of tech stocks is just not fashionable

Keep in mind the rules of a secular down trend - the secular down trend will have at least 3- bull and bear cycles and one of then (usually the first ) will be a Granddaddy - now we are just into cycle 3 and this could mark the end of the long down trend with a surprise to the upside in 2009-2010

Note the three bears of Cisco and Texas Instruments - these sleeping giants will soon awake and catch many by surprise - remember it is buy-hold, know when to sell and know when to buy again.

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