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COMMENTARY ARCHIVE: DEC 23, 2008

Where's the Bottom?

"The Bottom" is one of those sensuous phrases that stock market commentators like to use when describing this mystical, mysterious creature. Declining markets end after the bottom is explored and stabilized.

Typically, a turnaround happens slowly. First, the market drifts within a numerical range until it feels comfortable. Then, suddenly, and often with no apparent reason, it rocketsupward. Those waiting to buy at the lowest point are left in the dust.

Sometimes there are "false bottoms." What appears to be a stable shelf suddenly collapses and the market drops into a new lower range. In early October of 2007, the Dow Jones Industrial Average closed above 14,000. This July, August and September the Dow stayed mostly in the 10,000 to 11,000 range, then dropped 2600 points or 25% in one week. For the last ten weeks it's been in the 8,000 to 9,000 range.

With disturbing economic forecasts and financial surprises becoming the norm, it's easy to see why people panic and seek safety by moving all of their assets to cash. However, this mythical stock market creature can defy reason and negate all scrupulous analysis. Emotions can take control and become more powerful than manipulative hedge fund managers. Negative feelings can cause markets to react to short-term news, but positive ones can spark a long-term economic recovery. Dramatic days are ahead of us. As we welcome a change of political leadership in our country, let us hope this also becomes an economic turning point.

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© Copyright 2015 Bob Dreizler, Chartered Financial Consultant All rights reserved Registered Representative and Investment Advisory Representative, Protected Investors of America. Member FINRA/SIPC This website and Bob's Latest Commentary newsletter are for educational purposes only and are not intended to contain recommendations or solicit sales on any specific investment. Opinions expressed in my newsletters and this website do not necessarily reflect the views of any other organization mentioned. Registered for Securities in CA, AZ, CO, CT, NM, NV, NY, OR, TX, WA. If you are not from one of these states, we will not attempt to transact securities, or provide personalized investment advice unless and until we are licensed in your state or international jurisdiction.