There are some signs of market top today. Basically I'm using an article from seekingAlpha, digest it, and include my personal opinions.
* Non-confirming signals. US market rally is not likely sustainable. The world is economically connected. The problems in EU and China will affect US.
* Fluctuations. The market in the last two weeks acts differently from the last 3 months or so. To me, the market is deciding whether to continue its rally or start its correction. Both sides have not won the argument yet. The recent volumes are low to indicate most are watching and not participating.
* The AAII sentiment and VIX have been reversed from positive. They are good short-term indicators.
* Profit taking. The big boys have not participated yet, but they will. Once they do, we will see the sudden rise or fall of the market.
Well, sell in April and go away has some truth. Why April instead of May? It has been up too high and Newton's gravity law applies. Do not forget to come back to the market on Oct. 1, which is the best month from my recent statistics.
Market timing is not a science. When I predicted right on the peak and bottom, 75% is luck. It also depends on your risk tolerance. I do not want to take the risk to make the last buck. When it blows up, you do not have time to react fast enough.
Many including the author of the mentioned seekingAlpha article predicted wrongly on the market since the beginning of this year even with good arguments. Very seldom the experts are wrong two times in a row. Even a broken clock is right two times a day.
The market may go side way (about 3%) and you may be able to take advantage of the volatility.
Here is my view on market today.
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(c) TonyP4 2012. Written in 4/17/12. Last updated in 4/17/12.
Disclaimer:
Do not gamble your money you cannot afford to lose. Past performance is a guideline and does not guarantee future performance.
All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
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ReplyDeleteOnly the liars will tell us they predict the market tops and bottoms consistently or they're really lucky (I do not believe in luck in investing). I've my guidelines to predict them. They do not work all the time, but usually they're within a certain %.
ReplyDeleteWhen you are not sure the tops, sell them at 5% or so higher than market prices. Cash is both an insurance and opportunity to move back at better prices.
When your sold stocks are still going up, just do not check the prices as they would be damaging to your mental heath. :). I keep track of gain/loss after sold stocks. If I include in the opportunity benefit, they are just close to even.
In two months, FONR makes over 200% gain. I sold half of it and then it still went up 25% yesterday and now I place an order of about 10% higher. It will cover many short-term losses. I buy at risky market but sell/buy ratio is far higher.
The market seems to be heading the direction as this blog indicated (again, market timing is not a science).
ReplyDeleteI expect another 5-10% drop but I've been placing buy orders with prices about 5 to 10% less than the current prices. It is my guess on entry point.
Some predict the Dow would go to 8,000 (the support line) and some may say it will go even lower for different arguments.
I predict it will go 5-15% drop. There are so unknowns and some newer ideas.
- Employment will be improving gradually but slowly. The corporate cannot generate better future profits with current employment level. I do not know whether the gain will be from US, aboard, or both.
- Oil will drop by to $85 range for a while until the economy improves. Supply and demand determines the price. Commodities will be in same shape.
- Housing starts to improve slowly and gradually with the same pace in employment. Existing inventory will be wiped out mostly in at least 2 more years.
- We'll start a new secular bull market within 3 years.
- The tax increases in 2013 may play a role in the market.
The current soft (could change to hard in the future) landing of China does not affect US that much as US has about 7% of its GDP to China. However, several countries have only 20% of that will suffer. They are Australia, S. Korea, Japan... with some commodity and oil producers.
ReplyDeleteEU and USA basically produce same majority of products, so I do not think EU will drag down US.
There are many bright sides of US: ending of wars, cutting of offense budget (could be larger), abundant gas...
The employment figures seem to be improving. Well, it is an election year and these figures can be manipulated easily. Many have given up finding jobs, not eligible for employment, under employed, new college graduated without jobs for year... When California cannot balance the budget, they will lay off a lot, so is postal. Recession is closer.
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ReplyDeleteFrom 4/29/2012 (the day I posted an opposite view on an article on SPY rally in SeekingAlpha) to 5/21/2012 for 22 days, SPY has lost 7% or 118% when annualized.
ReplyDeleteThe above prediction is quite correct.
There seems to be a temporary surge (a 5% for US market is not unlikely) than dip if the EU crisis is reduced by:
ReplyDelete1. Result of Greek political decisions.
2. The big bail out of ECB.
The negative thought is Germany would leave EU to let the losers taking care of losers.
Will see.