Times They Are A Changing

The market continues to further stretch to the upside with the S&P500 over the last 4 weeks running up 130 points and the DJIA rallying over 800 points in the same period. The rally this week was partly fueled by comments from David Tepper on CNBC, a hedge fund manager, suggesting that he remained bullish. Is it crazy to think “professional” money managers would buy on statements from another fund manager, legendary or not. Logic easily goes out the window when emotions are so high and can often evoke “irrational exuberance” or the twin brother discouragement when on the other end of the spectrum.

Many market participants who have been waiting for a market pullback have not had the chance in 2013 as we haven’t had 3 consecutive down days this far. Sidelined cash holders are no doubt in panic buying mode as the market seems to have left them behind. Short sellers have been handed their heads and completely eradicated for the time being stepping aside from the market.

It may seem like a perfect storm for Equities to run higher, but I have felt it is more likely a turning point in the markets in the coming days/weeks. It is very strange behaviour to see market cycles move in an almost straight line up or down.

We have had an enormous and quickly staged rally from the 1400 level in S&P with modest earnings and dividend growth and most of the companies 2013 earnings expectations loaded for the back half of the year.

The rally thus far has clearly been driven by global easing by almost all central bankers, Japan in particular with the Nikkei up over 43% YTD on a massive stimulus plan (same size as US). I do not see this type of move as anywhere near sustainable and have raised cash in the recent months, being selective of what I continue to hold, carefully scrutinizing my personal research thesis’s.nikkei

I am not calling a market top and as @ReformedBroker said on Twitter “I do not wait for market pullbacks, I wait for dividend payments, you can put that on my tombstone.”

With record low bond yields and so many sidelined managers waiting with piles of cash, this could just be the start to another leg in the 09-13 bull market. I don’t pretend to know where the market is heading in the short-term but one thing I know is it will be higher 30 years from now.spy

“In the short run, the market is like a voting machine, but in the long run, the market is a weighing machine.” – Benjamin Graham


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