Watch List: 8/14/09

This was a volatile week for those who follow the market. We had a wild swing in the Dow which jumped from below 9,250 to above 9,400. At the end of the week, we are down 47 points. My watch list rose from 10 to 13 companies. Although the bottom three are marginally above 20%, they are great blue chip names that I can't leave them out. Here are the companies on my watch list as of August 14, 2009.

The companies that are within 10% of the low offer a great opportunity.
I flagged you to Becton Dickinson (BDX) last week in my watch list. It turns out that Warren Buffett is looking at the same thing. See this link for the related news. Related video.

Articles & Video

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Leuthold Says He May Buy More Gold in Bet on Dollar Drop

El-Erian on the Markets

Market Commentary

We are at a very important inflection point. Let me explain. The Dow reached a low on March 9, 2009 at 6,547.05. The Dow then rallied to a high on August 13, 2009 at 9,398.19. This is a 44% rally within 5 months time frame.

Now, I am going to take you back to the crash that marked the beginning of the Great Depression in 1929.

The Dow reached a low on November 13, 1929 at 198.69. The Dow then rallied to a high on April 17, 1930 at 294.07. This is a 48% rally within 5 months time frame.

Noticed the similarity? Please understand that I am not trying to draw any correlation or implying that we are in another Great Depression. The purpose of this is for investors to be award of market barometer. Investors faced the same question back then "Is this the return of good time?" and thus they piled into the market. Soon after, their hard earned money were lost. Please look at the chart below for reference.

Great Depression		Current Recession
August 13, 2009	9398.19	April 17, 1930	294.07
March 9, 2009	6547.05	November 13, 1929	198.69
Gain	43.5%	Gain	48.0%
Duration	157 Days or 5 months	Duration	155 Days or 5 months

Before deploying your hard earn money, please be aware of the risk in investing. As for myself, I have a stake in the market (mostly cash) but due to the tremendous gain in the previous months, I will be protecting those gain and not trying to grow my capital.

Art

Disclosure: I took a position in ABT and PG this week.

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