Bert Dohmen: No Time for Buy and Hold

One year ago, in October 2007, Dohmen's newsletter was headlined "Top of the Rally" -- characterizing that rise from midsummer 2007 a "fake-out rally."

Now he's predicting another fake-out, saying: "Shorter term, we're due for an oversold rally. People will bargain hunt thinking they're getting buying opportunities of a lifetime, and they'll all be trapped at the top of this rally."

When is that likely to happen? Here's Dohmen's response:

"We'll tell our subscribers. But I can say the worst is still ahead over the next several years for stock market investors.

"We are seeing the greatest deleveraging in the history of mankind, because it was the greatest financial bubble we've ever seen. This is a flight to cash, because no one has cash. Cash is the rarest commodity that you will find in any household. And it could take 17 years from the 2000 top in the stock market to reach the next good buy point for long-term investors.

"In the meantime, it will be a great environment for traders, with plenty of tradable rallies and declines. But forget buy and hold. It will be the road to financial ruin in this environment."

Isn't there something optimistic to say, I wondered. He reminded me that false optimism doesn't help and is not an obligation of the media, or me. His final words: "Use any rally to sell."

Well, I checked in with Dohmen late Tuesday after the Dow soared nearly 900 points. He wasn't impressed. "It takes more than one day to make a rally," he said, telling me that a 38% to 50% retracement was certainly a possibility. That would bring the Dow back to between 9860 and 10,400 for, in his words, "a very tradeable rally." But it would take a "decisive close above 9300" to convince him a rally has that potential.

This wouldn't be worth printing if I hadn't followed Dohmen's advice for 30 years, and seen for myself how accurate, though not perfect, his assessments have been. And that's The Savage Truth.