Mean Mr. Market
Today the futures market jammed us higher. I'm sure many bears with heavy shorts are sweating right now. I expect today will be a down day for many of the indices. Daily predictions are like Ouija boards but the tape is awful and there are other forces at work. If one doesn't have a model and methodology, there is likely a feeling of being left behind here. If you sold at the very bottom in July, you missed a decent rally in some sectors. You also made a major investing mistake. You sold when some indices were down 20% in less than two months. And, if you did that, you are likely now just putting your money back in the market only to have someone take it from you again. Remember, the concept is buy low, sell high. Not sell low, buy high. I wouldn't be so giddy that the market is ready to take off to the upside here. Nothing in my analysis has changed. Of course, my models could be wrong but if they are, the market is lying to me. And, remember, those calling for a low using the four year cycle are likely wrong. I've harped on this topic for a long time. First off, if you are using cycles to predict a four year low in October, there are two cycles which supersede the four year cycle right now. If we get a major correction, the low will likely be set in 2007. I'm using October based on some time series analysis as I have posted before. That's pretty loose but if I nail it, I'll be changing my name to the "Enlightened One".
Could we get a rally into 2007? I guess it is a possibility we might top in the March time frame but I wouldn't be committing large dollars to it. I still believe we will not make anything other than marginal new highs on any index. Personally, if I were to get long, I would be averaging in. And, I would do it near the end of or after October if the market obliges.
Those who were short certain stocks or indices are being crucified right now. Many were short the wrong stocks or wrong indices. The short bets were on technology and the long bets remained in energy. So, guess what? They lost on both sides. Energy cratered and technology went up. Serves many of these high priced managers right. If the big hedge funds, I say hedge funds because they are the long/short investors, are being paid massive fees, they ought to do a little thinking. I've been bearish oil and materials, told of a rotational move out of them into tech, bearish transports, bearish late stage industrials, bearish anything to do with China, bearish emerging markets, bearish Asia, bearish broker/dealers, recently bearish consumer staples and utilities per prior posts and bullish on ten year government bonds. Oh, and short term bullish homebuilders weeks before the Barron's cover story. Nice little rally here in homebuilders. Misguided but still behavior is predictable to a certain degree. Not bad. If I'm bullish on anything, it would be big cap American and European companies outside of banks, energy, materials and financial stocks that pay a 5% or greater dividend. But, since I'm not bullish, that is only what-if. Remember, the savvy investor does not feel the need to be invested at all times. Especially when my models are puking.
One final note. Wal-mart. In the last few weeks Wal-mart is up about a year's rally or about 17%. This is predicated on lower oil. It's also predicated on an expectation the Fed will be easing within a reasonable time frame. Remember, the market doesn't care about today. It is looking six to twelve months out. This is a major mistake many investors including professionals make. That is why you need to be able to take a trade when the economy might look like civilization as we know it is ending. The market doesn't care about the bad news being reported today and you shouldn't either. Homebuilders went down starting well over a year ago. The news has just become very ugly in the last few months. Back to Wal-mart. So, at an annualized rate, Wal-Mart's ascent over the last few weeks will yield a 300% return over the coming year. Still want to chase? One must fight irrational urges to be a successful investor.
Here's a bigger question. Wal-mart has been biding time for seven years. Lower highs. Something big is likely to happen over the next year or so as a bearish formation is developing. The stock could snap out of the formation and move to the upside or it could decline to what I see is around $32ish as a first line of support in a major correction. I'm off. Have a good weekend!
Could we get a rally into 2007? I guess it is a possibility we might top in the March time frame but I wouldn't be committing large dollars to it. I still believe we will not make anything other than marginal new highs on any index. Personally, if I were to get long, I would be averaging in. And, I would do it near the end of or after October if the market obliges.
Those who were short certain stocks or indices are being crucified right now. Many were short the wrong stocks or wrong indices. The short bets were on technology and the long bets remained in energy. So, guess what? They lost on both sides. Energy cratered and technology went up. Serves many of these high priced managers right. If the big hedge funds, I say hedge funds because they are the long/short investors, are being paid massive fees, they ought to do a little thinking. I've been bearish oil and materials, told of a rotational move out of them into tech, bearish transports, bearish late stage industrials, bearish anything to do with China, bearish emerging markets, bearish Asia, bearish broker/dealers, recently bearish consumer staples and utilities per prior posts and bullish on ten year government bonds. Oh, and short term bullish homebuilders weeks before the Barron's cover story. Nice little rally here in homebuilders. Misguided but still behavior is predictable to a certain degree. Not bad. If I'm bullish on anything, it would be big cap American and European companies outside of banks, energy, materials and financial stocks that pay a 5% or greater dividend. But, since I'm not bullish, that is only what-if. Remember, the savvy investor does not feel the need to be invested at all times. Especially when my models are puking.
One final note. Wal-mart. In the last few weeks Wal-mart is up about a year's rally or about 17%. This is predicated on lower oil. It's also predicated on an expectation the Fed will be easing within a reasonable time frame. Remember, the market doesn't care about today. It is looking six to twelve months out. This is a major mistake many investors including professionals make. That is why you need to be able to take a trade when the economy might look like civilization as we know it is ending. The market doesn't care about the bad news being reported today and you shouldn't either. Homebuilders went down starting well over a year ago. The news has just become very ugly in the last few months. Back to Wal-mart. So, at an annualized rate, Wal-Mart's ascent over the last few weeks will yield a 300% return over the coming year. Still want to chase? One must fight irrational urges to be a successful investor.
Here's a bigger question. Wal-mart has been biding time for seven years. Lower highs. Something big is likely to happen over the next year or so as a bearish formation is developing. The stock could snap out of the formation and move to the upside or it could decline to what I see is around $32ish as a first line of support in a major correction. I'm off. Have a good weekend!
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