Getting more Conservative - Waiting for Direction

The market is at (yet another) interesting point. We've had a sizeable rally the past week, held the gains, and now are getting the inevitable "back and fill" pullback. Bulls would love to see buying interest pop up as these stocks pull back; bears will argue this is yet another head fake in a series of head fakes. While my economic views are poor, heck maybe dire - the economy and the stock market can disassociate for long periods of time. Just like they did in September/October 2007. So I remain open to any outcome,even if I disagree with almost every bull arguement of why everything will be fine in 6 months so the stock market should roar now in anticipation of the rosy 2nd half of 08.

Since we could go either way I continue to trim positions (taking a layer "off") by 10-15% in many of the top holdings and build up cash reserves (now near 30%). I would of liked to see a push through S&P 1390+ but we appeared to have topped out for now, and are in a tight range of about 30 S&P points 1350-1380. Until we get more decisive I'm going back to my Switzerland stance... i.e. neutral. The Kool Aid was fun while it lasted.... most of these commodity stocks have had a very nice 2-3 day run but could be about to roll over again. I have my shopping list and, as always, will be buying my favorites on the inevitable.

This remains a traders market... not an investors. Below S&P 1350 we get bearish again. North of 1400 or so, bullish. Right now, we are in another indecisive no man's land, and with the day to day volatility that each day's earnings reports will be bringing I expect a lot more of "nothing works for more than a few days" type of trading. It remains a very difficult environment for people who rely on trends to last for more than a week...

The Fed's minutes from last meeting come out at 2 PM - remember there were 2 dissenters versus the depth of the last cut (2 is rare, 3 would mark outright rebellion). I don't know if there will be any language about inflation but I assume the dissent is some people on the FOMC who realize inflation is actually real for people who make less than $125K a year. The market continues to poo poo inflation, but as with all things unless Barron's/Wall Street Journal/or a Fed official reminds them of it, they will ignore it or explain it away. Thus far Fed officials are summarily dismissing inflation. I do believe in the coming 6 month period they are going to be forced to acknowledge it - and only at that point will the people on Wall Street say "hey maybe it is a problem after all". And stocks will sell off... or should ;)