Safehaven | Stocks: "Red Alert" Reviewed and Updated

April 11, 2005

Stocks: "Red Alert" Reviewed and Updated
by Douglas R. Gillespie

Summary

You would not use "Red Alert" in association with something about which you did not feel very strongly. Which is precisely why I did use it on two occasions in recent weeks regarding my sense of foreboding about the stock market. On balance, this expression of concern already has shown a modicum of accuracy. It is over the next several weeks, however, that I suspect the current and the prior warnings will earn full justification. If so, investors should be using rallies to increase their cash reserves.

Introduction

Paradoxical, perhaps, but it's the stock market's recent rally that have helped to reinforce my bearish inclinations. Last week's overall strength was right on schedule, conforming to patterns that have been developing over the last few months. These are patterns I interpret as distinctly negative in nature and in probable outcome. It could make for a late spring/early summer that is significantly worse than what the market has experienced so far during 2005, which has not been good at all. I currently envision solid double-digit declines for the year to date by sometime this summer.

But I'm getting ahead of myself. In looking forward, I believe it best to summarize what has occurred over the last five months, give or take. Much of this will be in bullet format; please pardon the syntax, as well as some jumping around in chronology and subject material. Much will serve to update the thinking outlined in the two missives referenced above: http://www.gillespieresearch.com/cgi-bin/s/article/id=523

Douglas R. Gillespie, Sr.
Gillespie Research Associates
165 Sheridan Avenue
HO-HO-KUS, NJ 07423
201-447-5743

Doug Gillespie oversees his own financial-market and economic consulting firm, Gillespie Research Associates. For a complimentary sample of Dougs material, e-mail him at drgillespiesr@aol.com.