Not A Perfect World

The current setup in the market is far from perfect. There are numerous issues that are bothering me. It seems short term sentiment among traders is a little too bullish. Rydex traders added yet again to their longs yesterday and are positioned quite aggressively. Short term market timers as measured by the HNSNI are very bullish. Italy has yet to agree to the reforms that the EU is asking for. Government spending in the US  is set to decline in the coming months. I could go on but you get the picture.

There are many issues that bother me. With that said, I believe the market is more likely to head higher than lower into year end. Seasonality is strong at this time of year. While that may seem simplistic, seasonality works more often than it doesn't. Hedge funds are under invested, underperforming and my sense is that they are getting very anxious and are about to chase. Corporate profits are holding up and corporations are repurchasing stock and engaging in cash takeovers. Amgen initiated a $5 billion tender offer for its own shares yesterday.

The economic outlook is scary. But the stock market is not the economy and at the present I believe they are headed in opposite directions. I remain bullish and worried.


Anonymous said...

Bullish and worried is often the best spot to be.

Tsachy Mishal said...

I hope you are right