Good posts all. I will take issue one matter. As for the individual investor thinking he can do better than the pros, I think I understand your meaning in that you refer to the average J6P who buys AOL and never looks back and will hold for the long term. However I think those on this thread do understand the market better than the "professional". The "heads" of mutual funds wander from convention to convention and spend all daygetting wined and dined by potential CEOs of companies that want institutional investment. This leaves the kids to actually do the investing/trading. I have read numerous articles and seen many shows that disclose the person who is actually controlling the fuinds is typically a kid right out of college or else has about 5 years total experience in the market. None of them have ever seen a bear market or a "correction" that didn't bounce back in 3 months.
It is like a friend of mine was saying a while back in frustration. "My system used to be perfect, I never lost. I must be doing something wrong because the last year all I do is lose." He didn't understand that for the last 14 years, all you did was throw a dart at the Wall Street Journal and buy whatever it hit and you won. Now there are only about 200 stocks out of the tens of thousands that exist that are above where they were last year.
As for when it will drop, I am hoping you are right about the blow off top but I am getting mroe and more nervous as time goes by. The news is getting worse and so are the market internals. Normally this would be the time to buy because the news couldn't get much worse and I equate the news lately to last October. The only problems is we haven't dropped like we normally would have. There is no fear, no capitulation, no real selling. Short interest is low, the put call ratio is low considering the internals of the market and out of all the fast burner stocks I track, almost all were up today. MU, MSFT, CTXS EBAY etc. I find it hard to beleieve we will rally without someone dropping this at least temporarily to get the J6P money first and we need some sort of capitulation. I am seriously starting to think we are repeating last years pattern with just a few twists on the chart. A honky dory everything is fine appearance until the big drop comes with no warning.
It is dangerous to be on eithger side now long or short. Notice the huge swings on the OEX the last couple days in the last hour, more so yesterday. A normal day is about 5 points through the course of a day, the last couple days there have been swings of at least half that in seconds. Volume is low and because of this, they are able to swing things strongly at will. I believe no one knows where this is going anymore, even the big money. I see money being taken off the table in defensive moves and being re-allocated to the bigger more fluid names like before. No one wants to be short, yet no one wants too much exposure long unless it is a volume stock they can dump out of quickly.
Your call for a blow off could still come as I have read article after article about how funds are more cash than ever, this sideways market has been going for month s now so even though fund inflows have slowed or reversed, the new money is piling up from non use thus there is a hoard of cash waiting to do something, anything when the all clear is given. Normally this would be put into bonds until it was decided to move it to stocks, but the bond is weak so no buying there either. There is a mountain of cash that will either blow this thing up to the stars or else remain on the sideline and get spent on puts as the market finally capitulates. I think it will all be decided based on tomorrow's report though as Don said, it will be a delayed reaction due to options unwinding and may not move hard until next week although, the institutions have been unwinding earlier lately and have usually been done by Wednesday. In light of the report tomorow, I wouldn't be surprised if they finished today. Note the swings in the futures today, looks like a nice top to bottom swing for getting straddled to me.
Good Luck,
Lee |
