Last day of the best buying opportunity in this market cycle if not our lifetimes

Tomorrow, Friday December 5, in all likelihood will probably be the last day of the best buying opportunity in this market cycle if not our lifetimes. Bad employment news Friday could first drive the market down to once again within 10% of the recent lows. So we intend to be ready to buy more. Just as hedge funds were forced to sell to raise cash for redemptions, next hedge funds will have margin calls and be forced to buy to cover their enormous short positions.

The energy of the first leg up of the market recovery will catch Wall Street mad money off guard and cause massive closed hedge fund losses of liquidity. This could be the greatest short squeeze ever as hedging transitions from the short side to the long side in a matter of days. The echoes of the explosive first move should be seen over the first quarter of 2009 as the cash influx reverberates into succeeding market sectors.

Remember how mergers and acquisitions always drive stock prices higher? Right now hundreds of companies like JNJ and shrewd investors like Warren Buffett are taking advantage of the depressed prices of corporations to buy them. That can only drive stocks upwards and closer to traditional fair market valuations. Just yesterday Warren Buffet’s offer for entry into the nuclear industry was challenged with a counter offer that doubled his first offer. That is how the market will get bid up by mergers and acquisitions.

That will cause stock market investors to soon realize their folly of being out of the market. They will come back in droves and the short sellers may resist at first… but they will then panic and it is conceivable that the market will recover rapidly as it did in 1987. More than 50% of this year’s investor losses could be recovered by December 31 or shortly thereafter.

We have been testing our Respiral technical method for two years now. See http://investment.suite101.com/discussion.cfm/3561 for the history of the development of the tool from the Spiral (a Parabolic SAR method) combined with the MACD method. They were being tuned to eliminate whipsaw at market highs and lows. We replaced discrete buy and sell turning points to avoid whipsaw and use a transition period instead to allow an orderly transition over a period of time that averages slightly more than a month for reversing our market position. It provides periods for cherry picking into or out of the market. These are the central periods we had from 2007 and 2008 testing. Buy (March 2007), sell (July-October 2007), buy (March 2008), sell (5-28 to 6-12, 2008), and buy (Nov 2008).

Today all world markets feel like the quiet before the storm. Tomorrow will likely be the bear’s last challenge and we will in all probability look back on this past year as another short lived panic and recovery as hundreds of billions of dollars flow in from the federal printing presses, incredible values tempt investors, and the cost of borrowing rests at record lows.