Can we believe the smart money?
After Friday morning's interfund transfer, I am now invested 100% in the stock funds (40% C, 30% S and 30% I fund). The indicators I have been mentioning seem to be giving a consensus reading that a bounce is due.
There are certainly no guarantees but it is very convenient, perhaps too much so, that the survey I mentioned Friday shows the "dumb money" being the most bearish (believe the market is going lower) since March, and at the same time the new "smart money" survey is telling a different story. They are now more bullish and less bearish than any time since late April.
Chart provided courtesy of www.decisionpoint.com
Even then however, the bounce was met with more selling a week later. This is the type of action that we should be expecting. This gives a couple of possibilities and opportunities. If you miss this rally you may get a chance to buy low, and possibly lower depending on the degree of the test. For those like me who already jumped into stocks, you may get a chance to make some money and then step aside again missing the retest.
That type of strategy requires you to be nimble and to stick with your plan. If this is what you believe will happen, don't let a rally sway you from forgetting the potential retest of the lows, and don't let the retest bring on so much fear that you miss the next buying opportunity. It sounds easy in theory but it is tough to call in real time. Check your emotions at the door.
I had mentioned that all this seemed too convenient. We are getting past the weaker six month period for stocks for the year, and heading into the stronger. And at the same time the dumb money is bearish, the smart money is bullish, and the indicators are all well into oversold territory. Sounds a but too good to be true. There is so much talk (from smart money in my opinion) that we are now going to get a bounce. Will the market humble us as usual and head down again before going up? That is a possibility. The more people that think A, the less likely we won't see A. It's never easy.
My plan of attack is to sell a rally. If the S&P 500 moves up to 1200 my antennae will be looking for a reason to get back out. I can see 1200, 1205, 1210 and 1225 as resistance areas. If we do get a move near 1220 it will be very difficult not to get caught up in the "this is it" bullish mentality. That is when the market will likely destroy the will of the last of the weak bulls. Another pullback at that point would be so demoralizing, it just could produce "the" bottom. That could take a few weeks to play out.
I am getting ahead of myself here but I still like bonds and the F fund over G fund when I do get out of stocks in the coming days. They still look like they are due for a bounce. If the Fed surprises us with a pause, or even a suggestion of a later pause, in interest rate hikes during or leading up to the November 1st meeting, bonds may see a nice short term rally.
That's all for today. Currently 40% C, 30% S and 30% I fund. Thanks for reading.
After Friday morning's interfund transfer, I am now invested 100% in the stock funds (40% C, 30% S and 30% I fund). The indicators I have been mentioning seem to be giving a consensus reading that a bounce is due.
There are certainly no guarantees but it is very convenient, perhaps too much so, that the survey I mentioned Friday shows the "dumb money" being the most bearish (believe the market is going lower) since March, and at the same time the new "smart money" survey is telling a different story. They are now more bullish and less bearish than any time since late April.
Chart provided courtesy of www.decisionpoint.com
Even then however, the bounce was met with more selling a week later. This is the type of action that we should be expecting. This gives a couple of possibilities and opportunities. If you miss this rally you may get a chance to buy low, and possibly lower depending on the degree of the test. For those like me who already jumped into stocks, you may get a chance to make some money and then step aside again missing the retest.
That type of strategy requires you to be nimble and to stick with your plan. If this is what you believe will happen, don't let a rally sway you from forgetting the potential retest of the lows, and don't let the retest bring on so much fear that you miss the next buying opportunity. It sounds easy in theory but it is tough to call in real time. Check your emotions at the door.
I had mentioned that all this seemed too convenient. We are getting past the weaker six month period for stocks for the year, and heading into the stronger. And at the same time the dumb money is bearish, the smart money is bullish, and the indicators are all well into oversold territory. Sounds a but too good to be true. There is so much talk (from smart money in my opinion) that we are now going to get a bounce. Will the market humble us as usual and head down again before going up? That is a possibility. The more people that think A, the less likely we won't see A. It's never easy.
My plan of attack is to sell a rally. If the S&P 500 moves up to 1200 my antennae will be looking for a reason to get back out. I can see 1200, 1205, 1210 and 1225 as resistance areas. If we do get a move near 1220 it will be very difficult not to get caught up in the "this is it" bullish mentality. That is when the market will likely destroy the will of the last of the weak bulls. Another pullback at that point would be so demoralizing, it just could produce "the" bottom. That could take a few weeks to play out.
I am getting ahead of myself here but I still like bonds and the F fund over G fund when I do get out of stocks in the coming days. They still look like they are due for a bounce. If the Fed surprises us with a pause, or even a suggestion of a later pause, in interest rate hikes during or leading up to the November 1st meeting, bonds may see a nice short term rally.
That's all for today. Currently 40% C, 30% S and 30% I fund. Thanks for reading.
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