No matter how many times I play peekaboo with my son, he is still surprised when I pop my head out and yell peekaboo. Watching the markets recently is liking watching a game of peekaboo. Analysts low ball estimates that they know companies will beat the estimates. They know this because they basically take the estimates from the company, who know they will beat. And market participants are surprised when companies yell peekaboo.
The phrase "Buy the rumor, sell the news" does not seem to apply to this market, as market participants act like surprised infants. While I decided to stop fighting the market by moving to a market neutral strategy (long pharma/short SPY), I have no plans to throw caution to the wind and join the party.
I can't help but think that the market is seducing every last player in before reversing. I am getting close to the point where I would be willing to move to a net short position again but I am waiting for the Wyeth/Pfizer transaction to close before doing so. The deal should have closed already but a bureaucrat somewhere in the DOJ has been too lazy to rubber stamp the deal. Until then I am sitting on my hands and waiting.