How Low Is Low?

Whew! That was quick! The rally I mentioned in my last column vaporized in a matter of days. You've got to be very nimble to make money on the long side of this market. We can definitely call that a fleeting moment.

What happens now? Once again breaking the crystal ball off the shelf, I see the same darn story that I have been talking about for most of this year. We rallied through the first quarter, failed in the second, bounced a little and then are now headed back to test the lows in the last three months of this year. I'm being very generous and probably too optimistic when I say we will "test the lows." Most of the stocks I follow are making fresh 52-week lows right now — many are making multi-year lows!

How low is low?

Before I start this little exercise I want to say that, if the stocks go as low as these data suggest, I am going to spend all of my cash buying shares. I can't call the turn, but if these stocks come remotely close to these price points, I will jump up and down like a kid in a candy store.

Lastly, I don't think we are going this low, but I want to be prepared. One of the maxims I have posted on the wall of my office is from the Samurai Trader: "Expect nothing. Be prepared for everything."

So here are the gory details:

On the last day of August, the shares of Intel closed at $16.67. That is the lowest monthly close since December 1996. For Applied Materials, the $13.36 price at the end of August was the lowest monthly close since December 1998. If you believe that other technology issues would follow Intel's path, which makes sense because it is a giant of the technology world, we would see Microsoft hit $20 per share. Similarly, Cisco would trade at $7, Oracle at $5, and Micron at $15.

The numbers, tallied courtesy of Track Data, look like this:

Microsoft closed the month of August at $49.08, Oracle at $9.59, Micron at $17.25 and Cisco at $13.82. As I write this, Intel is once again making new price lows (I am writing this the day it will release its mid-quarter update). The shares of Applied Materials are pushing toward the $12 price level.

Will we get there? It would take a devastating decline in the market to push Applied Materials to $5 and Microsoft to $20. I don't believe that kind of decline is in the cards. Again, I am just preparing. The point of this is to show you what is possible.

I can imagine you are all thinking what I was thinking when I looked at this — "Ouch! These levels are a long way from where these stocks are priced today!" Not to toss more gas on the nervous fire, but I suspect that no one will step in front of the train — particularly individual investors — in the near term because we are headed into the dreaded month of October. Not that October is the worst month for stocks or anything. In hard data terms, August is the worst month, but October is known for market debacles. Tread carefully and be patient.