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Market May move is like an October "fake out"
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I have seen this pattern before. We have a decent run and analysts start to relax and explain why it will continue. This is despite the fact that we have seen frequent dips (especially in the NASDAQ) during May and beyond with usual recovery in November. Now, please don't misunderstand, I am a professed Market Bull and always see stocks to buy even in the darkest times. I rarely have tried to "time the market" and usually stay fully invested. However, this is one of those times where I think the market has gotten a little ahead of itself considering the financial mess we still have, the housing slump, high gas prices, high food prices, and company earnings that have done fairly well but are still reduced. Also, consumer credit card debt is still very high. The Fed has helped with significant easing, but that has likely stopped for awhile and might even reverse. So, if you were to considering timing the market, it depends largely on what you really believe. If you believe that this is a bear market and we have been experiencing a bear market rally, then you will be inclined to think that a large correction is coming soon. If you believe we are still in the middle of a long bull market and have simply corrected, then you will be inclined to think this market could continue to rally into the summer. Now, being a bull, I would like to believe the latter. Unfortunately, I do not. I think that we are in the middle of a bear market and this is a bear market rally. As such, we are likely to tumble pretty fast from here and might retest the March lows. With the lower interest rates, stimulus package, and company year over year comparisons becoming easier, I think we can rally effectively near the end of 2008 or early 2009 (given that the market looks 6-9 months ahead.) I even believe that we will be able to climb out of this bear market in 2009. Short term, I believe we are in for a significant drop back toward the March lows. When that will happen, I cannot really tell. I tend to believe that May is giving us a "fake out" like some early October up moves. When the sentiment turns, I want to be positioned to profit. Thus, my persistence with using ultrashorts along with selective long positions. We will see fairly soon if I am right. If I am, I might be able to move up the ladder a bit in this round. | ||
Comments (1)
Diamond Jim,
Sell in May, then walk away; come back on Turkey Day.
The so-called Summer Doldrums are a recurrent phenomenom in the [preter-]natural ebb & flow of the market's peregrinations.
The one factor that would belie this trend is the amount of sideline money out there that might move in on a wing & a prayer on any "head fake" trigger. I maintain that the market is the only game left in town and is probably the last hope for salvation in the minds of those who would control our economic system.
I believe that the Federal Reserve is "liquefying" the finacial institutions with the understanding that they must maintain and support an ORDERLY and relatively "elevated" market.
There is too much at stake -- failure is NOT an option. For example, consider corporate and other defined-benefit pension funds. If the funds lose money they must be "subsidized" to maintain the fiduciary level of balancing current value with future contractual obligations. Do you remember several years ago when GM borrowed $17 BILLION dollars solely for the purpose of funding it's grossly "UnderFunded" pension plan. It was due to the 2000-2001 crash.
In general, I don't think this is a matter of Timing ( as in All In or All out). I think it's more a matter of rotating into safe havens in the univeres of stocks or seeking a Bull Market elsewhere in the world.
Keep your Beta Low, your divvy yield up and your spirits as high as the bottom of DuffBeer's Wine-dark empty prognosticating
beer bottle.
Don Ferk ( fka VikingWarrior )
The market is floating like a balloon - on hot air in an election year.
Song O'da Day
Up, Up and Away - The Fifth Dimension w/ Marilyn McCoo
http://youtube.com/watch?v=8DQTs155nsA
http://youtube.com/watch?v=8DQTs155nsA
Posted by don ferk | May 16, 2008 11:39 AM