Am I nuts? Well that's a no-brainer!
Since the beginning of this move, I have believed that there is nothing fundamental about it and that it has been a structurally led move that began with a lack of sellers, short covering and asset allocation switches. That was enough to kick-start the countertrend rally that began in October. After a certain comfort level was reached, the momentum players came into the party and lifted stocks even further and caused new shorts to cover. Ahhh, then came the stategists, analysts and chartists talking about "the" bottom. All put together, too many people were chasing the move for fear that they were wrong on the way down and certainly didn't want to be wrong on the way up.
My position throughout the period was that in late September and very early October, the market was extended to the downside and was deeply oversold no matter what time frame you wanted to use (daily, weekly, monthly), which set the stage for an intermediate countertrend rally that could last longer and go further than most anyone thought - all based on structural vs. fundamental forces. My instinct at the time was to panic and sell like many were doing, but I know when I feel like that it is time to do the opposite - and the indicators agreed. Remember the definition of insanity is doing the same thing over and over again and expecting a different result. I learned this through making many a mistake.
Then about three weeks ago, I felt the upside was overdone based upon how closely the market was tracking last year's action. It had gone further and lasted longer than most thought and the little names were beginning to breakout. Whether that was coincidental or not isn't relevant because it seemed to work. Everyone had become a technician watching the breakouts and a clear "buzz" was in the air for the year-end rally. When I called for a similar pullback to last year, I got a slew of emails suggesting that I am missing the obvious. I have always been early, which brings the risk of being wrong right away (and possible more than right away, which is why one should always have an exit strategy before initiating a position whether for investment or trading purposes).
I write this for one reason. Fast-forward to today and we have a market that isn't sure what to look at. The comparisons to last year are still somewhat compelling and people are trying to use fundamentals to explain structural moves. In addition, the news seems as bad now as it was good a few weeks ago when excitement was building. The funny thing that I have noticed is that in reality nothing fundamentally has changed from three weeks ago. Nothing can change THAT fast.
So what is different? The mood - the very people that told me I was nuts a few weeks ago for jumping off the train when stocks were breaking out, are telling me that I am nuts for looking for an oversold bounce when stocks are breaking down.
Then again, as Toddo said to me a few minutes ago - "you are nuts, and it has nothing to do with the market." Now I have to figure out which Tony is going to respond to that kind of comment.
Have a great day and my random thought is that if you are having a tough day and feel down, like in the movie "Peter Pan" with Robin Williams...think of the one happy thought that always makes you smile. Mine is my kids, what is yours?
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