As for the S&P 500 if it breaks out from here it would actually be very bullish as it 'retested' support @ 1350 (where it magically bounced to the exact point - shocker, eh?) - and if it can ever pick up some volume and break through that 1390-1395, one must revert to full out Kool Aid bull again praying at the cathedral of "it will all be fine in 6 months". I will say this market continues to ignore each and every bad piece of data thrown at it, so you have to respect the animal spirits even if they are nonsensical. Using logic is what killed me when I was a young investor... now I simply let the price action dictate short term action even if fundamentals scream completely opposite. Remember - animal spirits took us to all time highs in the S&P in Sept/Oct 2007 just as we were about to enter the worst credit situation in history, only to be saved by historic moves by the Federal Reserve. So don't buy the "the market is a great discounting mechanism and the price action clearly signals great things to come." The bond markets and equity markets have been going in opposite directions for 80% of the time the past half year - and bond guys are generally considered to be much smarter than equity guys...
I will be content to underperform if we rally between here and S&P 1395, since I have large cash and short exposure. Still playing conservative as most of my favorite names have had very large runs and have pulled back very little so I don't really see spots where I'd like to add more exposure. I'll change tact if we break the levels mentioned above.
Long Mechel in fund and personal account
2 comments:
Mike,
Looks like the market is throwing away all the bad news and I guess limit orders have triggered at 1350to bounce sharply from there. Yes I agree, using logic is a poor strategy in this game.
There is a hug cash on sidelines.People have missed the past rally and confused. I expect another washout to downside so that smart money can enter at low prices. Though hope is not an option.
what do u say
"Using logic is what killed me when I was a young investor... now I simply let the price action dictate short term action even if fundamentals scream completely opposite"
This just might be one of the best investing advice I have heard. I could not relate and agree more. This goes along the same lines as the market is never wrong. But what makes this market so complicated is that the moves are so large and fast that if you do not anticipate the movements before they occur, you will end up chasing or missing most of the move. I guess if you are a buy and hold investor it would not matter. But who still does that anyways aside from those crazy foreign sovereign funds. Alas more emphasis needs to be put in technicals first rather than the fundamentals or one will get crushed. As another saying goes, the market can remain far more irrational than you insolvent. Quite the conundrum but you have to play with the cards you are dealt.
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