Being bold and buying into the market can make you big bucks. There’s no doubt about it.

Legendary investor Sir John Templeton’s rapid rise to wealth is a case in point. He is noted for buying 100 shares of each company trading for less than $1 a share in 1939 and making many times the money back in a 4 year period.

But if you’re inattentive in this type of market, you’re going to get whacked, says Adam Lass. He predicts US blue chips could lose another 34% before the bear bottoms out. That would put the Dow at just over 5,362 points.

Several months ago, I offered readers of this column a glimpse of my master chart of the Standard & Poor’s 100 (OEX). At the time this one chart revealed several facts quite clearly:

• That the US was entering a bear market,
• That said bear market would last more than the few months many were hoping for,
• And that it would not stop at a mere 10% or 15% loss.

Now that the initial events predicted by that chart have come to pass, it behooves to look at it again in the hopes of determining if we have indeed hit the magic moment when value alone might overwhelm negative sentiment.

And I have to tell you quite frankly that I just don’t see it yet. In fact, it is quite possible we could see American blue chips lose another 34% before a true bottom arrives.

The chart also shows us a particularly interesting detail regarding the market’s most activity. Note that the recent dive that apparently blindsided both Wall Street and Washington was both completely predictable and defendable!

It occurs at the exact point where the previous long-term rising trend finally gave up the ghost. Once breached, there really was no other response available.

Using this as a guide, I was able to direct my readers to buy a series of put option contracts that are doubling in value over and over again each week that the market’s tumble continues.

I am serious about this claim: As an example, the Diamond Falls puts we advised buying back in July for $585 per contract are now trading for $3,225. This is a gain of over 451%.

Now that the market has shaken free of this false hope, it simply must seek support at the falling trend’s true bottom line, which my chart pegs at 264 on the OEX. (For those of you who prefer to use the slightly suspect Dow Jones Industrial 30 as a guide to the blue chips, a 34% drop would translate to Dow 5,362.)

Does that mean that there are no buys out there right now, no stocks that are close enough to a bottom to make them the buy of a lifetime, the basis of a future fortune?

The answer is that there probably are such diamonds lying about in Wall Street’s wreckage. But you are going to have to be really agile as you zip out into the avenue to pick them up. And you had better be damn sure there aren’t any trucks coming.

If you want to go bottom feeding right now, please — PLEASE — consider purchasing more of Diamond puts such as the ones I previously mentioned. If nothing else, they will protect you from further broad market downside, allowing you to retain your dirty treasures.

Source: Hey, Where’s My Ball (and Is That a Truck Coming Around the Corner)?

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