Still Not Excited

The trading day seemed to move at a snails pace but we finished out the day with a sudden flurry of late action that pushed the major indices into positive territory. Breadth remained positive all day and market leadership was in technology, retailers and bio-tech. Gold, oils, energy and financials were the laggards today.  

The media was focused on reporting today that a positive September was the first in the last 10 years and that the resilience of the market to hold in view of the current economic circumstances was impressive. In other financial news outlets, market commentators were using these factors to declare victory for the bulls. One specific market ‘guru’ went so far as to say that if you were not invested in technology you would be missing the boat.

 I’m not nearly as optimistic about where we are headed.  If the market continues to repair the technical damage that has been done since we hit highs back at the start of August that would help however we are still in “prove it” mode. If and when the indices do prove that the last couple days were something more than an oversold, end of the quarter, mark-up bounce, we will have plenty of opportunities to put our idle cash to work.

A common belief that investors must learn to overcome is that they are going to miss out on positive action if they aren’t in before the market starts to act better. It is this thought that leads investors to remain in the market as it drifts lower and lower for fear of missing the big rally.

I suspect that many this weekend will accept the media spin on the positive September, carrying the enthusiasm over into Monday morning. Readers know that I am very skeptical of Monday morning strength and would use any such strength to pare back further and hedge my longs.

It may seem that I have been unduly pessimistic lately however there is no one who would prefer to be an optimistic, raging, snorting bull than I. My caution is the direct result of having seen this story many times before. The market has a very interesting way of sucking you into believing all is well, only to smack you around when you least expect it.  

If Mr. Market continues to act well, the technical picture will improve which would allow us to be more aggressive on the long side.  For now though, we should enjoy our gains from our trading, lock in some profits, salt away some cash, and enjoy the weekend.

See you on Monday.

RevShark