The week ahead

Everyone else is commenting on what they see ahead, I might as well also ;>)

Obviously, the market will continue to go down, until it goes up again--the three questions are how far down, how long till it turns, and once it turns, how far will it go up?

Since the answers are ultimately unknowable, a lot depends on your time frame, your trading/investing style, and risk tolerance.

Technical analysis, sentiment readings, and even fundamental analysis can identify opportunities, and maybe give an "edge", but ultimately it is risk management that separates the winners from losers over the long term.

The charts of the Nasdaq and the SP500 that I posted show the possibility of a bounce off support. I may buy this, I may not. A lot depends on the early action. If hypothetically, I do buy, you can bet it will be on a tight stop. But even if I do buy, and we get a good bounce, then what? Is it back up to new highs--or will this be a dead cat bounce prior to another ride down?

I've had the view for a long time that over the next few years, equities were headed nowhere. I repeat my previous view that just as the first Dow breach of 1000 and the last were about 16 years apart, I expect the last Dow close under or near 10000 to occur somewhere in the 2012-2017 range. Thus, my bias is to always expect more on the downside with this market. I have to try real hard to be objective, and not let this bias blind me to what is going on.

So what sorts of things this week would I be looking for? The most obvious sign of a "bottom" would be a big sell off, a further VIX spike, and a sudden intra-day reversal, in both indices and the VIX, on big volume. While that happened back in summer '02, it might be a little too obvious. One thing I haven't quite seen yet is a real crescendo of fear--I haven't seen too many calls for Dow 6K or 7K, or sub-1K Naz, or Maria Bartiromo saying we should all short stocks. Jim Cramer IS calling for you to bottom fish. Too many people, in fact, seem to be looking for the start of a rally here.

In short, while I'm ready to buy, if that's called for, I'm still skeptical.

The most important thing, as always, protect your capital, so you can stay in the game.

They say they never ring a bell at the bottom or the top. I'll tell you what--if I'm really convinced that we've seen "the big bottom", I'll ring the bell right here. Promise :>)