Sector Investing

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My only assumption right now is that we have yet to bottom. Three reasons. First there is still too much bullishness in the II Poll. A lasting bottom is unlikely to happen until we see more bears than bulls in this contrarian indicator:

http://www.schaeffersresearch.com/streetools/market_tools/investors_intelligence.aspx



Second, even if we are in the process of bottoming it's only been a few months so far getting to where we are. While we may bottom sooner than at many times in the past its highly likely we have not done it yet. I would expect a retest of the 2009 lows:



Third, I still expect the S&P 500 will hit a low on it P/E of 5 or 6 like it did in the 20's, 30's and 80's. That fits nicely in to a retest of those lows.

http://en.wikipedia.org/wiki/P/E_ratio



If things unfold as I believe they will then investors who have cash on hand will be afforded a nearly once in a lifetime opportunity to buy stocks as cheap as they have ever been on a P/E basis. While it may take many years for stocks to ever become as overbought as they were in 1999 and early 2000 surely that will eventually come to pass as well. So buys made at the next bottom could potentially be excellent long term buy and hold opportunities compared to any other time in the last 12 years.

I will most likely be trading myself though rather than holding.

RtS