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I haven't been great, as of late, in judging investor sentiment. I've distrusted this rally all the way above S&P 1400. That's fine--I may have lost an opportunity but I haven't lost money. But now I distrust my own judgment. As soon as I wrote a post where I simply imagined becoming bullish, the market sold off and continues to do so today (thank you, AIG). Therein lies the trick with sentiment--when you feel the market is doomed and want to sell everything, it's rally time; when you feel you should finally stop being a bear and jump on board, it's correction time.
I've been asking myself, what would a top (meaning a top to the Bear Stearns rally) feel like? Maybe something like this:
* Calm. Volatility is low. Wasn't it silly to panic?
* Complacent. Those financial stocks aren't so bad after all. Why not buy them?
* Confident. Uncle Sam and Uncle Ben got your back, and the check is in the mail.
* Cocky. Recession? No worries. Short and shallow.
* Crazy. $125 dollar oil is no big deal. No problem there.
I didn't intend to use all C's there, but once I started I couldn't stop. Sorry about that.
The point is, while I haven't been spot on as far as anticipating changes in sentiment, I wonder if we won't look back at this week consider it the end of a bear market rally. Isn't this what it would feel like? I'm not predicting, I'm just thinking out loud.
[Simultaneously posted on my personal blog.]http://thestocksurfer.blogspot.com/2008/05/what-would-top-feel-like.html
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Comments (2)
I am in agreement with you on the bear rally. It has really taken a nice chunk out of me, but I count my blessings since my hedges long kept me from losing more than 10%. I am almost completely tapped out as far as "emergency cash" is concerned, so if you are wrong (an me along with you) then down with the Titanic we go. But then again . . .
---Jonathan
Posted by Jonathan Coyle | May 9, 2008 3:54 PM
Randy,
You forgot one 'Feeling' emotion in your list :
CONFUSING !!!
I have always maintained that the Market will always moves in a direction that fools the maximum number of market participants. It has ever been thus.
I believe that the reason for this is that most people exist at the (0,0) co-ordimnate in the space-time continuum. The Infinite NOW of what is will always be. The market tends to be a foreward-loking discounting mechanism.
If it's " Hard Times " now, look to the early cyclicals to be the next UP-movers. As an example, there is every indicaton that Smart Money is slowly moving into the Transportation stocks.
In a low interest rate environment, the dividend paying Utilities may soon have their day in the sun as well.
Also, the Market itself is an amorphous aggregate. It's our job as stockpickers to sort out the selections that outperform the general market under any conditions. There's always money to be made somewhere and/or somehow.
Not So ????
Don L. Ferk ( fka VikingWarrior )
Posted by don ferk | May 10, 2008 1:32 PM