Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Drink No Wine Nor Trade No Top Before Its Time


We may all want to drink the 2005 Bordeaux vintage now. But it isn't ready yet.


Drink No Wine, Trade No Top?

I noted some weeks ago that the market was destined for more strength. However, I have been somewhat quiet of late due to some HATE mail. (H)ow (A)re (T)he (E)quities GOING UP? No one wanted this move! No one liked me being tactically bullish. I actually had to hide. Well, I was just "in the rough" as usual. But, the Behavior of Breakouts argued and still argues for more time. Sure, you can "save a bunch of money on your car insurance" but you can also save a bunch of money by not "Trading a Top before it's Time." Again, as I said this is an ending move and thus, stocks are in an Adoration/Mania phase. Markets often make their biggest and most unbelievable moves at the beginning and end of a trend. My firm's experience suggests that: "Sentiment is often generic rather than specific unless there is an acute emotum tell or a cohesion of other cognitive metrics." The most important tell would be a reversal rather than just high sentiment. Our daily sentiment is 96% bullish today! But we recorded a 99% bullish last week! It's not the sentiment; it's the cognitive changes which tell you to try to trade the top.

Maybe It Ain't That Hard After All?

I look below at the SloganSearch for HARD LANDING. This macroeconomic assumption has become very popular rationale for buying both stocks and bonds. On 10/3, the Contrary Asset Allocation Model inferred: "Maybe the slowdown will be short-lived. Bonds remain at risk and stocks could continue to rally a bit further!" That trade is happening and the media popularity/propagation of the HARD LANDING slogan is confirming that the macroeconomic spin is a consensus curve ball. The big slowdown trade has become a "Foul Tip!" At the end of the day (adoration phase) rising rates and the recycling back up in the repricing of the planet will dive an inflation stake into the heart of the earnings lovers. The landing likely isn't as hard as Goldloxers thought. Big Ben hasn't tightened tightly enough.

Can You Pick the Top Too?

We can send a man to the moon, but we are far from understanding the psyche of the markets. "Cognitively unacceptable" market behavior occurs more often than we expect. No one likes that. The market recycled back up and is having an "unbelievable" final rally. A mania phase is usually "unbelievable." As I said last week: "Stocks are in a silly season but we may try to play along with it. This is an Adoration/Mania high. Do you believe it? Mr. Market may make a believer out of you yet. He doesn't want to tell you about the high…at least not yet. That is his job. Let him do his job." We all want a "hole-in-one." We all want to "pick tops." We may all want to drink the 2005 Bordeaux vintage now. But it isn't ready yet. Well this market high may still be in the barrel too. Yes, it has now become much closer to being bottles but not yet? The ideal signal would be a cohesive reversal of the triune (3 brained) bullish rationale. Drink no wine before its time, trade no top before its time.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos