These are very interesting times, and I thought I would capture and preserve my ideas on the current market conditions. This is a great way to see how wrong I can be and keep myself humble. It also provides a good reference point to watch changing conditions and outlooks.
What better time to keep track of "what was I thinking when...?" than starting my own account talk when:
- The S&P 500 just closed within 3 points of its all-time S&P high close
- The DJIA just completed 10 straight up days in a row (all of March so far)
- The DJIA avg has been setting new all-time highs daily
I might have just jinxed the above events!
This could be a major turning point, or it could be that we're just crossing another milestone on our way to uncharted territory. Even Jim Cramer is having his 8th anniversary episode of Mad Money today. I've learned a lot here over the past 3+ years since FireWeatherMet introduced me to this site. My goal is to continue to learn, stay humble, be open to new ideas and possibilities, and adjust when new information dictates a change in strategy is due.
Near-term: I think we see new record closes in the S&P 500 in the next 1-2 weeks as we zigzag around the 1555-1570 range and we eventually break out to 1-2% above the current record, breaking the all-time record intra-day high of 1576 as well.
Mid-term: This is most interesting to me. Many experts I read are calling for a correction, and some are warning of a crash, that I have to consider the "law of maximum frustration" that says that the market seeks to inflict the most pain. The possibility that the market heads well above current levels in the next 2-7 months has to be considered. The May-June stretch always wrecks me so I may just put my TSP money on vacation every year then as default.
Long-term: I believe we are still in the Secular Bear market that began in March 2000. We'll only know in hindsight if we've left the highs from March 2000 and Oct 2007 (1550-1565) behind for good. I think that the global economic situation (massive unmanagable debt, currency wars, fake Chinese economy, etc) will have a big impact again and give us one more leg down. If that occurs then the time to buy and hold (and DCA) will have arrived and could last 1-2 decades. I also believe that U.S. recessions come every 8-10 years and another is due sometime around 2015-2016 so that will have an impact.
Strategy: I want to be in the market making money as much as possible. When we are in a QE phase, as we are now, I believe corrections are held to 3-5%. Since the low in March 2009 the great majority of the gains have come during QE phases, while the stretches between QEs were quite choppy and the market mostly moved sideways. Some day the Fed may lose its influence over the markets so I will treat topping signs seriously and may move to the sidelines briefly. So far this year these actions have caused the gap between the S fund and my Tracker rank to widen. I think that one day soon just rumors of Bernanke's retirement will cause the markets to get skittish and his eventual retirement could have a big impact on the markets. I expect Obama to twist his arm to re-sign, maybe even before this becomes an issue.
I'm currently 100% S Fund with no IFTs left in March.