All things considered, when it comes to the pursuit of profits on Wall Street, one can easily present a rather compelling case either for total abstinence, or at most a minimal degree of participation. As individuals who seek out the most favorably positioned sectors of the market, we have seen our menu of investment choices shrink dramatically over the past few months. Although there are still a handful of funds that have not fallen into technical Sell territory, I have been recommending a protective 100 percent cash position for a number of weeks. In a market that continues to be shadowed by clouds of uncertainty, downside risk remains far greater than upside potential. Until the investment pendulum clearly swings in our favor, and we discover to what extent various sectors have been affected by the turbulence in the global economic community, I do not anticipate much of a change to my current opinion.
As we have seen lately, even in the relatively aggressive world of sector fund trading, there will be times when market conditions dictate the adoption of an extremely cautious investment approach. The current weakness in the family, however, is readily seen by the fact that 17 Selects are currently priced below their 200 day moving averages, while 28 funds are now below their 50 day moving averages. We have found ourselves in this type of situation in the past, of course, where it makes sense to pocket even the most minimal of gains, despite the fact that a fund may not have produced a true technical Sell signal.
Where many of Fidelity's Selects are concerned, however, we can still take some comfort in the fact that due to their steep declines over the past few months, we should be presented with some sterling buying opportunities at some point in the future. In the case of many industry groups, there is obviously a tremendous amount of upside potential, but potential is all that it is at this time.
Until the investment environment turns positive, and specific sectors generate well-defined Buy Signals, we must remain cautious and operate under the assumption that our patience will eventually be rewarded. When these will occur, of course, is impossible to predict or determine at this time. As events unfold in the weeks ahead, however, we should have a much better idea of exactly how much longer the money that is burning a hole in our pocket will be relegated to the bullpen.
A very Happy & Healthy New Year to everybody.
Bernie Kaplan |
