Daily Stock Picks Report Archive

The Dow was down over 500 points at the close today and this sell-off is turning into a spiral nosedive.  European stocks were down and that spread to the US stock market, and the evening before the Asian markets were down substantially.  Now tonight, Japan is down 9.4% and no doubt, this will spread to the US market again tomorrow morning.

Australia cut their interest rates a full 1% point and Hong Kong is expected to lower their rate as well.   Neither action nor announcement had a positive effect on their market.  Even if the Federal Reserve does an emergency lowering of rates tomorrow, it is doubtful this will help.  The selling is causing more selling as redemption requests to the mutual funds are requiring the investment companies to sell more stocks to raise cash in order to meet redemption requests.

Eventually the sellers will be exhausted and the buyers, and short sellers who have to buy to cover their short positions will come rushing in like a dam that is breaking.  What it looks like is going on is the result of the Lehman Brothers investment bank, AIG and other banks that have failed and how that affects worldwide credit.  Rumors that the MS, Morgan Stanley deal with Wachovia Bank was falling apart and MS stock went sharply down.  Even the denial from MS saying that the buyout of Wachovia is scheduled to take place by this weekend did not stop the selling.

It appears that we will be in full panic mode tomorrow. 

It is clear that I was early by a day or two on calling the bottoms to these stocks but this is not a time to sell stock.  This is the panic that I really wanted to see to make it the textbook perfect capitulation which causes a reversal in stocks.  Panic, mayhem and blood in the streets is what we might see tomorrow with huge trading volumes and wide swings from low to high in stock prices.

This will probably be one of the best opportunities to buy stocks long in the next 20-30 years.  Perhaps your grandchildren could sit on your lap asking you if you bought stock in October 2008 and held it for a year.  What will your answer be?  Even now that it looks like I am early at calling the bottom by 2 days the difference in stock price will be made up very quickly as the buyers step in and bid up prices and a panic buying situation will occur as much as panic selling is tomorrow.

How could one extreme emotion turn to the opposite?  It does and always will in times like these.  It is human nature that cannot be changed.  Extreme fear turns into extreme greed as people say they can make up the losses after they see the market turn up sharply.  The rebounds typically look to get stalled on day 2, or day 3 of a rebound that I am anticipating.

Governments are announcing they will guarantee the bank deposits and offer credit to ease the credit crunch.  Germany announced yesterday they will guarantee deposits.  Tonight UK government said they will guarantee bank deposits.  The US will very likely lower rates, making Bernanke look like a fool that he has been after his speech today.  He has put himself in a position he has to lower rates tomorrow and now the question will be if .50% is going to be enough.  His speech today caused the big slide in the market when he did not announce a rate cut today.

If you have cash left, buy stocks long and the best stock charts after today’s correction are:  MOS, AGU, POT, HLX, FCL, ACI, AAPL, TCK, FCX, X, AKS, CMC, MT, and PRU.

Look out 2-4 months as your time horizon.  Many of these stocks can double or triple in price in the coming months.

Fasten your 5 point seat belts and hang on for the ride because it is going to be very emotional tomorrow and for the following few days.

Have a great day and I’ll talk to you tomorrow.

Mitch King

www.TradeStocksAmerica.com

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