A lot of folks are calling for the rally under way to keep going. Add longtime bear Chris Johnson from Schaeffer's to that group.
Obviously that could be correct, and I would be pleased if it is, but I have to wonder if the idea is getting a little crowded. From the bottom the market is up 6.3%. That is a big move for just two months.
I have written many times about the market turning quickly and rallying a lot at exactly the time it should not. This description could be applied to the current move. I concede there is good debate about whether it should have rallied or not but the move has been fast and big.
This is just an observation; I hear very little caution these days. I am not really gaming this thought in a meaningful way as trying to trade too nimbly for the short term is not what I try to do.
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2 comments:
Market looks pretty overbought, volume is not particularly robust and internals seem to be deteriorating so the rally could be running out of steam shorter term but longer term I still don't see what is supposed to fuel a sustained upturn in equity prices. I keep hearing about all the "cash on the sidelines" (never mind that this is a basic misconception cf. http://tinyurl.com/l4tqj ), improved corporate profits (which appear to be mostly buying back stock, going overseas or compensating higher executives), and all the other sell-side blather but none of it holds water as far as I can see.
And there's a larger issue here so excuse me if I slip briefly into semi-rant mode (all those who prefer unadulterated sunshine go ahead and skip).
The buy-and-hold investor who did so well in the eighties and nineties in a core index fund must be feeling very frustrated at the lack of risk premium this market has offered since 1998; e.g., staying in longer-term bank CD's would have given an equal or even better, after-tax nominal return than the S&P500 and, adjusted for risk, would have simply crushed US large-cap equity returns over the past eight years.
Don't want to make this sound too strident -- I've done reasonably well, even in this market, but only because I started in '81 and was too stupid to get out (having your legs slowly sawed off for two years followed by a swift groin kick five years later really does make a student attentive though) -- but unless the average retail investor starting in the late 90's found advise such as is available on this site (little plug for you there Roger even though you weren't up and running this in 1997-8) and sharpened his or her allocation skills accordingly they would have been better off avoiding the stock market altogether.
Okay, end of semi-rant (sorry).
Longer term I remain net long (hedged) with more cash than usual. If the market continues to go up, good, but I'm still taking the under on some side bets going into next week.
sounds like we are positioned fairly similarly
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