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Bottom tested: Buy, buy, buy

Today's Financial News - Posted October 24, 2008

Today’s action, while it looks bleak at first, is just what smart investors have been waiting for. We tested the October 10 bottom and could not muscle through it. Now, the only way to go is up.

By Andrew Snyder

Baltimore – (TFN): This is exactly what we could have hoped for. Overnight selling pressure hit panic levels, the futures market was halted, and then the efficient market took over.

Wall Street opened exactly where it was supposed to and has been trading off of session lows ever since.

Look at it this way. When the futures market was closed at about 6:00 this morning, investors were expecting the worst. Rumors of a 10% or even 15% drop were circulating through the investment world. It has not happened.

We tested the lows set on October 10. The Dow would have had to drop 809 points. The S&P needed to plunge 69 points. The NASDAQ index was the only gauge able to break through its low and it bounced right back.

That is the absolute best news bulls could hope for. It means the bottom is no longer arbitrary. It is now a concrete floor that you can trade on. If you want to take advantage of the market’s downturn and ride it all the way back to the top, today is your day.

Some great opportunities

So what trades should you be looking to make? Stick with big-name companies like Johnson & Johnson (NYSE:JNJ), General Electric (NYSE:GE), Wal-Mart (NYSE:WMT) and Microsoft (NASDAQ:MSFT). An even better way to shield yourself from the risk of picking a solitary bad apple is to buy the entire S&P 500  through a fund like the ever-popular SPDR (AMEX:SPY).

There are some sectors, however, you need to stay away from. The energy industry will remain tumultuous as oil prices drop.

Canadian producers like Suncor Energy (NYSE:SU) that are forced to use expensive techniques to produce their oil will see their margins enter negative territory. They will be closing facilities as fast as they can over the next year.

I cannot say it enough. Now is the time to be buying. Stick with the names you know and the companies with good products. Most importantly, pay attention to economic cycles. If you do, there is lot of money to be made.

For folks too timid to re-enter the market over the past few weeks, today is the indication you were looking for. We tested the bottom, could not break it, and now the only way to go is up.

I cannot wait to see what the next six months have in store. Greenspan was right. This is a “once-in-a-century” phenomenon. Take advantage of it.


Next Article: Government intervention: A history of failure

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Posted by Andrew Snyder · Filed Under Investment Strategies 

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