Action in Alcoa shares Yesterday Underscores why Bull Market Trading Strategies don’t work in Bear Markets

Alcoa (NYSE:AA) is a perfect example on why bull market strategies and trading practices don’t work in Super Bear market.  After releasing its earnings Wednesday evening July 8, 2009, AA opened up at $9.99 yesterday and peaked at $10.08, a gain of 6% from the previous day’s close ($9.46).  Shares then drifted lower and closed at $9.23, which was down versus the previous day’s close.  The rationale by investors for bidding up AA shares on the announcement was because it beat Wall Street’s earnings projections (losses were less than expected).  During the bull anytime a company solidly beat predictions the shares traded up.  This did not work during the bear because AA revenue was down by over 40% versus the previous year’s second quarter.  Prudent investors sold their holdings into the rally because AA revenue picture is still extremely weak.  Those who bought on AA opening lost over 7% yesterday on AA close.

The bear’s goal is to claw back all the easy money gains that were made by investors during previous bull, which began in 1982 and ended in 2007.  It accomplishes this by wearing investors and speculators down by taking nickels and dimes from them over long periods of time.  It took a nickel (5%) or more from those who bought AA on open yesterday.  This is why it is so critical to be extremely disciplined and patient during a Super Bear.  If you are not you will have little capital left to buy dirt cheap stocks at their bottoms, which will multiply in value even before the super bear dies and the new super bull is born.   

Investors should be cautious in the current economic environment and should maintain cash positions of 80% by utilizing short-term U.S. Treasury securities.  For more information about the Super Bear Market which began on October 9, 2007 and why it will not end until 2015 at the earliest go to www.bearmarketnavigator.com.