Well , "the trend is your friend" is an old saying that is more
often true than not. Getting on the wrong side of it can be painful.
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I'm been tracking this head / tail thing back to last August and
the picture is now forming. That beyond all the knee jerk stuff,
caused by index funds , and MO MO funds, you have a third party
of funds that do Asset Allocation. So of the I.F Mo Mo and A.A.
funds the first two set up most of the knee jerk , and work in
a trading range.
The A.A. does more to the MID term trend, and Political
considerations setting the longer term trend.
Bonds and currency all fit in here but effect both or all the
windows.
Asset Allocation is no small part of the equity market, the
picture seems to be That they rotate into the Liquid Blue Chip
Stocks, ( and bonds ); as they ease out of Mid & Smaller cap
stocks, and do this in a way to let the indexes fall.
Then at some point they start moving back into the Mid Caps,
and this stimulates the indexes and lets them take some profits
out of the more liquid stocks. It's not just a rotation, it's
sort of how they use the new money coming into the funds, first
aiming it at blue chips, then latter Mid Caps. They parlay the
new money with the rotation, that lets them take profits first
from one , then the other. These funds are not set up to trade
stocks as fast as the MO MO or Index Funds, they more or less poke
along..and that sets up the more mid term trend of the
indexes, it's no fixed pattern to the time on that trend, as they
also let the market tell them, and I believe they also look at that
via the divergence & convergence, and aim their new money to take
advantage of that.
Jim
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