Just Watching…And Watching…
First off, my quarterly review
will come out later this week. I know you can’t
wait for that classic piece of American literature.
I received many e-mails about my last report. The e-mails
were mostly positive, but a
couple of them questioned what I said…namely…the market could
go either way. Here are my thoughts.
I know it’s fashionable to take a stance all the
time…but sometimes I don’t believe
it is worth it. The markets are simply in a trading range here with
not a lot of bias. Technically, things still
look OK, but sentiment is too bullish
for my tastes. I have never seen a market rip to the upside with such
numbers, but at the same time, I haven’t seen
enough to tell me the market is going
to crap out…yet.
I have studied all the great traders and technicians on
Wall Street. I have found that
they all had a couple of important characteristics in common. First,
they all know how to manage a position. In
other words, never lose big dollars.
Secondly, and this is where I answer those e-mails: they don’t predict,
they evaluate. Predicting is for zipperheads. Do you remember the book
by Ravi Batra? It was called “The Great Depression of the 1990s.” DUH!
How about the fabulous book “Dow 100,000”?
The first book came out at the bottom
and the latter came out at the top.
How about all the fabulous strategists that had 6000
Nasdaq targets and 1750 S&P
500 targets…and that was two years ago. These are not stupid people
making these predictions. In fact, they are
all a lot smarter than I am. I spent
my time in college on Clearwater Beach and played tennis. They all graduated
from MIT and Wharton. Where I am smarter is
that I realize that unless I have next
week’s newspaper today, I can’t predict next week. (That was a great “I
Dream of Jeanie” episode. Roger Healy
went right to the horse track with the newspaper.)
So when I say I will let the market dictate, I will let
the market dictate. When I say I would rather react, I would rather react. When
I say I would rather interpret,
I would rather interpret. Here
are some of my interpretations.
- The HOMEBUILDERS have
topped. I
have been telling you that they were in their late
stage…and finally most are gagging. This is a short- to intermediate-term
call…not a long-term call. - CYCLICALS have topped. I
have told you many times in the past that CYCLICALS will
move for a short period of time before gagging. Many are now wedging up
on lighter volume…which usually precedes
further drops. - GOLD and OIL
are still in fine shape, but are now extended. I would love to see
pullbacks towards support. - GROWTH continues, for the
most part, to be out of fashion. The Nasdaq is starting
to show less aggressive selling, which could possibly mean the worst
is over near-term…on a relative basis.
The number of stocks that look to be shortable has picked
up. Breakouts are coming few and far
between. Because of this last statement and because of sentiment,
I believe that odds could favor weakness in the near future. But guess
what. The market does not care what I believe…I will just keep watching…and
watching…and watching…