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Dorn: Buy And Cry

The doom and gloom scenario is now reaching extremes.

We are down some 20% this year on the $SPX alone. Bears continue to call for lower and lower projections. Bulls have been taken to the woodshed and shot. Buy and hold has morphed from buy and hope to buy and cry to “I can’t take one more minute of pain—PLEASE get me out!!”

Cartoonists are having a total field day with the economic crisis and the stock market. Subpoenas are being served on the naked swimmers as tides go out and they are exposed.

The AAII (American Association of Individual Investors) readings are now in the range of bears: 70% and bulls: 18%. These numbers represent the lowest in the recorded history of the AAII, going back some 20 years.

The majority of market participants are wrong at major turning points.

The markets are designed to take the most money from the most people. People have been ravaged by this bear market as 401K dwindled to 201K (or even 101K). Trillions of dollars have been lost worldwide since mid-2008.

History does not repeat itself exactly, but human behavior does. The emotions of fear, greed, joy, sorrow, anger, hope, pride and regret have not changed since the time of the Neanderthal.

The majority of market participants are almost always on the wrong side or out of the markets when they turn, especially after so many traumas. Dale Carnegie said: When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion.

Remember—you will almost always be fearful, despondent, burned out, depressed and disgusted when you should be alert, refreshed, greedy and ready to pounce.

We don’t call bottoms, as they are seen in hindsight only.

The cycle work and roadmap we have been following indicates that the patient is may be starting to wake up—having been in its agonal stages and left for dead.

When it turns, it could be shock and awe for a few weeks.

Then we shall see.

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Janice Dorn, M.D., Ph.D., is a financial psychiatrist and chief global risk strategist for Ingenieux Wealth Management in Sydney, Australia. She also offer trading consulting and coaching services via her Web site, TheTradingDoctor.com.