There have been two major stand-outs in the market during this up cycle that began in September. The first is anything related to commodities. With the FED goosing money into inflationary assets, Jim Rogers ties his bow-tie just a little tighter. We know this. In fact, the price of commodities are so extended in relation to actual supply and demand, that I wonder who will be able to afford them other than the newly minted Chinese Billionaires.
The other sector that has been the best performer is the broad area of technology. Now, at year-end, you are being told that technology is “your savior”. It is where the gains are, where the beta resides. And you are tempted to buy it, hand over first.
This is the exact flipside to what you were told during the warm summer months. Back then, anything outside of the AAPL sphere of influence was a trap and should be sold even though most of the stocks in question had already fallen 30-50% from their yearly highs. Good advise, thanks for that! Most stocks tested their July 2009 breakout where we did some mondo-buying. Thanks again…
Since this rally began on September 1st, the MSH is up 28%. That’s right, in just one quarter, this key technology index is up by almost one-third. Has there been some fundamental change in the business since the summer? No. If fact, there has yet be even one reporting quarter since the rally began! Are these gains simply a snapback from some extreme bearishness? Has there been some new technology bringing new revenue and earnings? Nope. Just our PM friends looking for some Beta.
It is the end of the year and Dr. Fly has correctly warned us that there is NOTHING that can stop the Santa rally this year and he has been dead on right. With the FED doing 2 POMO’s a day, QEII in full swing, the ECB saving countries left and right and China encouraging 9% growth by hook or by crook, money managers don’t really need a reason to sell or to even take profits. The market is lulling everyone into believing the trend can continue forever.
Remember, individual investors are out of stocks and into bonds. The markets are controlled by the FED first and foremost, but are also dominated by computerized professionals who are happy to say goodbye to the odd lotter. They are why most indicators run to historic extremes. And most of those indicators are there right now. The cycle is stretched and that coincides with the end of the year fun and everyone believing that green shoots are back.
It is amazing how right the Maestro was. A stock market rally will do more for confidence than any stimulus, and now, after a huge 25-30% rally in the last quarter, everyone has been on the same page for weeks. There is a time when the consensus is right. But it doesn’t usually last very long.
For those who followed me into the abyss months ago, continue to raises stops, liquidate positions and watch the lemmings as they pump and primp themselves before they go careening off the cliff. Don’t jump into an overextended cycle because it is suicide. Keep your powder dry and get ready for the next opportunity. Don’t worry, it will be here before you know it…
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I have really enjoyed the last round of posts from you. Thank you very much.
I’m parked in neutral…Way too late to start buying things and too much of a party atmosphere to short…
It’s like the company Christmas party. The smartest ones leave early.
I just did.
I’m thinking of buying up some utility names to park my money for awhile. I’ve thought about it and that seems the safest move in these cross currents.
Oh this sounds far more arrogant than I intended. (laughter) it was a matter of fact statement.
Good wishes to you over the holidays, Scott.
Thank you for your posts, Scott.
I’m the Devil’s Advocate now…
With QEII in full swing, the ECB saving countries left and right and China encouraging 9% growth:
How long does the music continue to play?
Will it stop wtih the end of QEII, ECB bond purchases and China hyper inflation?
Keep saying the same thing every month so you can right sometime…remember a broken clock is right twice a day and drugs are bad.
And Merry Christmas to you also
Yeah, it’s like the clowns at NOAA that predict a killer hurricane each and every year. Then, 5 years later when there is a killer hurricane they can say, “see, I told you so”
My gosh. It’s like I’ve been a perma-bear throughout! Or that I’m net short!
Here’s news to you, my detractors: I got long 30 stocks during the summer months while you pikers were buying the VXX. You didn’t come out of your bomb shelter until we rose 20% off the lows. We’ve risen 6% or so in December and I began to recommend raising stops and selling at our targets in mid-Novemeber AFTER the market peaked in strength.
The market doesn’t go down here during the holiday so, because I don’t dive in and throw caution to the wind NOW, I must have missed it. NEWS FLASH: My profits are huge and healthy. My losses are sparse. I’m batting 750 this year and the number are all in my CreateCoin portfolio for you to see.
When I was recommending to take risk during the summer, fools were telling me how insane and wroing I must be. Didn’t I KNOW that the market had to crash again? It all worked out very well for my low-risk cycle investors. Now I recommend paring most stocks after a 20-25% 3 month run and you are telling me I must be a moron.
If the envirement changes near these levels, you will dissapear just like my detractors last summer. If we are to begin a new leg up, I will take the appropriate action. Grow up and find what works for you and suits you. Then get good at it.
The ill-temper targeted at anyone who isn’t howling at the moon and calling for more gains tells me all I need to know. Greed brings out the worst in a man and I’m seeing these types of angered replies more and more.
We probably go higher in 2011, but the froth has to be cleared from the cup and the stupid need to feed the Machine. It doesn’t happen any other way.
Bulls, Bears & Pigs – you folks know the saying.
Stocks fly like butterflies, but shit like bears. True story.
SB – nice work, but forgive the 5 digit pleebs. They know not what they say.
gotta say, the first paragraph was all you needed.lumber is a great example.the last time it was this high back right before april, LPX was trading at 13.40 look at both now.i use lumber as “my” canary,and she sings sweetly and most of the time her tempo is exact.complete imbalance all the way around now.nice how the give away works now, pomo, qe, giveth, flash crash taketh away.and until someone comes up with flashcrash indicator,how ya gonna be able to tell on a chart when ya think its to come.
SB gives sound perspective here. Those of us chasing momo at the company Christmas party courtesy of the Fed, should be well aware that this game isn’t going to last forever. At some point we are going to see Skynet become self-aware again. There will be the usual excuses used as covering fire…PIIGS, Korea, Euro, Dollar, hyper-deflation, hyper-inflation, Gov’t shutdowns, locusts.
LLL is happy today.
Remarkable know-how! I have been searching for everything like that for a time finally. Thank you!