"Market Gives Three Big Buy Signals"
By James J. Cramer
RealMoney Columnist
3/24/2004 9:20 AM EST
"Dramatic drop in the number of bulls in the Investors Intelligence survey, a huge decline. Large put-buying, bigger than I have seen in a year. An oscillator reading on Standard & Poor's proprietary measure that's the most oversold in a year. Multiples that have come down to the point where United Technologies (UTX:NYSE - commentary - research), General Electric (GE:NYSE - commentary - research) and Pfizer (PFE:NYSE - commentary - research) are the cheapest that anyone's seen in years.
If I didn't know any better, I would be margining at my hedge fund, I would be buying call protection to the upside, layering on the insurance against a big run.
One other thing: No one wants to hear it. Too much money has been lost. Too many people are "so underwater," as my emailers indicate, that anyone putting that schematic of oversold/bears preponderance/cheap multiples comes out looking like another "buy the dips"-meister who is totally discredited.
Why are these readings so important? Because when we got to 45 billion/minus 5 on the oscillator and had low multiples with lots of put-buying, particularly on the QQQs (QQQ:Amex - commentary - research) and the SOX during the great bear market of 2000-2003, you had to cover your shorts and go long -- every time. These were the same readings, minus the VIX, that caused short-covering rallies. So let's just say you were a total Kodiak and you thought that Hamas was preparing a joint strike operation in your neighborhood (welcome to Israel!). You still would cover your shorts right here.
I, too, am wary of bottom-callers. Some of you think that I am one, even as I have stuck 100% by my thesis that a third of the stocks have gotten to where they have to go -- particularly the dividend-yielders -- another third are trying to bottom and a final third are strictly in transit ... down.
But let's at least acknowledge that these indicators worked in the previous bear market. They should work now, even though I don't think we are in one. "
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Enviado: 24/3/2004 19:09