No start-of-war rally:
(or, if we do get one, I'm betting it ends abruptly, retesting lows)
Reasons:
1. everyone is expecting one
2. shit happens. Wars almost never go according to plan (Iraq1 was an exception, and those expecting a repeat don't understand how exceptional that war was). There is a not-small chance of a major terrorist attack, or N. Korea doing something unpleasant, or something else I don't have enough nasty imagination to think of.
3. the uncertainty doesn't end even if Regime Change goes well. Then there is Nation Building. Then there is N. Korea, then Iran, then the rest of the Dominoes. No letup. The Administration has made clear that Iraq is the beginning of a series, not the end, not a resolution of anything.
4. we've never got that VIX over 50 on high volume, that cleansing surge of panic. Still lots of weak hands out there.
5. over the last 3 years, many pros and amateurs have learned to SellTheRally. A self-reinforcing trend.
6. the reason stocks can't sustain a rally, is economic, not because of war. And the economic recovery is feeble at best. This won't be changed the day after we take Baghdad.
I sold a bit last Friday, and I'm thinking of selling a bit more today. Sitting on 70% cash, no shorts. I wouldn't mind a furious rally that allows me to take ST profits and go to 100% cash. |
