The fearmongering continues in all quarters. You can't open a newspaper or read a blog without being exposed to it. Talk continues on market crashes and of high-flying stocks being shot down. So I ask you, what has changed?
Before leaving for vacation, I had suggested that buying the retrace off the pop-the-top move was an OK trade and that bonds were likely to work higher as well. Well, in retrospect, the bond trade was rewarding, but those gains just counterbalanced the losses in equities if you took both trades since the listed issues have worked lower, while tech and small caps have worked sideways to higher.
So is this where you should pack the bags and get off the train? Is the risk just too great here? Do the fearmongers have it right this time? Is a significant pullback just around the bend?
We heard the calls for a market top in August and then again in September, but they were little more than "Chicken Little" screams. Is October different? Obama told us Thursday that "This time is different." Maybe he knows, huh?
All I know is that if I pull the charts back and take a look at them, I still cannot see anything to get all worked up about. As an exercise, just look at the qualified trends across the indexes and the major market sectors as of today. This certainly doesn't look ominous to me.
Enlarge Image Other than a few sideways trends, everything remains bullish and in most cases confirmed bullish .
If I want to fear something, I have to look to the future and the potential for a more worrisome setup to develop. As an example, on the S&P 500, when looking at the intermediate-term chart, I can see that the 1627.50 area will shape up as a critical area in little more than a week, for that would create the potential for multiple swing-point breaks on multiple timeframes. Again, that's a possibility, but we need a little more time to even have the structure set up and then we actually need to find some sellers at lower prices. So far, the sellers simply go away when price decreases.
Enlarge Image Again, I would ask, what has changed? The Federal Reserve is still pushing liquidity as are all the central bankers around the world. The PMI numbers continue to print better as a whole throughout the world. Corporations continue to be flush with cash and are likely to make their numbers again on a percentage basis as earnings seasons starts up again next week.
Yes, we do have problems in Washington, but it doesn't take a large leap of faith to assume that some resolution will come on the budget and the debt ceiling. I mean, those folks in Washington may not be the smartest cookie, but they are smart enough to know that at some point something has to give, so expect a resolution, not the end of the world, on that front.
I know it never feels good to buy or to hold equities, for that matter, when everyone is whipping up the fear factor on a continual basis. From both a technical and a fundamental viewpoint though, "What has changed?"
My answer is that very little has changed and that there are more positives than negatives, so I see no reason to abandon my long- and intermediate-term stock positions. In fact, I continue to add to those positions at anchored support zones on the pullbacks. If things really do change, then I will do so as well, but until that actualizes, buying retraces off the fears while hedging appropriately on a short-term basis makes the most sense to me.
Disclosure: Little is net long individual long-term positions hedged with long SDOW and PSQ inverse ETFs.
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