Fools rush in

I've been thinking quite a lot about this idea of a "bottom" to the stockmarket.

Logic says you can't pick a bottom and I can accept that, but I also get the sense that market in the short term is tired of all the red.

Many professional traders have been slaughtered in the last few months, institutional investors are forced to keep a certain percentage of their holdings in shares (even if the prices keep declining) and particularly if you look at the South African equity scene I reckon a big chunk of the hot money - the offshore investment funds - have been pulled out of our market.

For my own thinking I've pegged the Dow as falling to between 6500 and 6800. At the moment we're at 7000. Index weighting issues aside, the 7000 level looks pretty tough to break and I wouldn't be surprised to see a bit of a bounce this week.

The banks locally were flushed out on Friday and I suspect we'll get a bit of a relief rally this week. While I don't think the South African banks have seen the worst of it in terms of bad debts, they still remain super-profitable and paying dividends.

Taking a short term view (Close of trade on Friday) - I've taken the following positions:

- Small long positions on Absa, First Rand and Standard Bank
- Small long position Remgro
- Gold to finish above US$950 this week

While I still remain pretty negative about the outlook for equity markets over the next six months, I believe shares are starting to get pretty close to levels where we can absorb some earnings declines from previous high levels.

Let me emphasise one thing though - while we may be getting to the point where local equity markets are looking at historically attractive levels, that doesn't mean they're going up now... that I suspect is still going to take some time (at least the rest of 2009) before people start putting their toes back in the water.

Remember though that we still have an election to get through and plenty of job cuts to come into the system.

Only fools rush in.

Obviously things can change in the blink of an eye so tight stops might be recommended on the above (except perhaps the gold call), but lets see how Monday and Tuesday play out first...