New Bear Market Lows for Dow 30 Stocks

Well, the market did not have a wild ride today. There were no sirens going off when the Dow penetrated the November lows, and closed at a new closing low for this Bear Market. This is not the kind of successful test you typically see when a market wants to reverse a downtrend. The analysts on CNBC are convinced you should be buying stocks at these levels (except for Art Cashin). They all talk about dollar cost averaging, and that missing the first big rally of a new bull market will cost you 30%. Utter nonsense. Most people don't invest in the averages and such. Successful traders and investors will trade individual stocks, and they know it is smart to stay patient.

The stock market is leaking oil, slowly. These are the kind of trends that tend to persist a while, and they will kill those traders that keep trying to pick a bottom, even when prices seem low. Richard Dennis once said he lost more money trying to buy Sugar when it was trading under 5 cents than he did on lots of other trades.

A long time ago, in my first foray into futures trading, utilizing the Turtle system, I had shorted cattle and hogs. Normally, these are not the best trending markets. But, I got lucky, and shorted a couple downside breakouts in these markets. After they had gone my way for a week or so, my broker called me up, since I was basically a newbie, and said I should cover, and go long, since both were now cheap. Fortunately, I didn't listen, and those markets kept declining. Finally, they accelerated to the downside, then spiked up and that was the end of the downtrend. I made $6,000 on those positions with a $10,000 account.

The point is, the market is still in a downtrend, and volatility has shrunk quite a bit. Until it tells me otherwise, the direction will continue to be down. The first sign that the market will stop going down and try to turn higher is when we have a big day to the upside on heavy volume, or a big key reversal day. Within a week after that day, we will need to see a big follow through day to the upside. The market has attempted this scenario, and failed, but a new bull market will not start without this occurring.

Scott Cole
www.bestdaytradingstocks.com