A Topsy-Turvy Economy

Let me get this straight! I am sixty nine years old. I was brought up: 1) to save money; 2)to purchase a home only when I could afford one because home ownership is a privilege not an entitlement; and 3)if a person overextends by taking on excessive debt, that person should suffer the consequence of bankruptcy or foreclosure on his home. Now I find that my savings, largely in Treasury bills, are yielding 2%, far below the prevailing inflation rate; and, as a result of the government's intervention to save Fanny and Freddie, I am going to be taxed in order to bail out the profligates! What is wrong with this picture?

The stock market may have experienced some sort of distorted selling climax last week, with a washout of the financial stocks under very heavy volume on Tuesday and a sharp rally on Wednesday. In the distant past, a selling climax involved the ENTIRE MARKET'S cratering on very heavy volume in early trading and recovering to break even or better, all WITHIN THE SAME DAY. Tuesday probably marked the low in the financials for this cycle. The question is whether Tuesday's low was an interim bottom or THE BEAR MARKET BOTTOM for the S&P 500 Index?

At the low on Tuesday, the S&P 500 Index flirted with 1200. Often the market bounces off such round numbers. Moreover, bear market rallies can be seductive.

To review, I purchased a half position when: 1) the percentage bears reached the previous bear market high; and 2)the S&P 500 reached 1270, a 3/8 retracement of the previous bull market. I have been awaiting the next Fibonacci 1/2 retracement at 1170 and a level of 60% bears. The percentage bears is now at roughly 50.

So far, I have not acted. Even if 1200 marks the low, there is usually a successful test of that low within a few months. My style of investing requires patience and discipline, but, on the other hand, also the flexibility to change my mind if the market tells me to. Tune in!