I've been involved in the stock market (at various degrees) for about 15 years now and I think I can say I've seen it all. From extreme euphoria in 2000 to extreme pessimism in 2009 and everything in between. I have learned a great deal during these 15 years both from experience and the wisdom of others. One of the most important lessons/truisms I've learned about the market is the motto of this blog. Take for instance this bull market we've been in. Over the past few years how many books, experts, articles in the business section, ect, suggested that you be an optimist about equities and load up? Instead, all the focus was on sovereign debt worries, slow economic growth, high unemployment, fed manipulation, ect, all of which suggested you stay away from equities. How profitable was it to listen to this message? And yet despite the market hitting all time highs, there is still a considerable resistance towards embracing any LT optimistic posture. The doomsdayer herd is still in denial, in fact, I'd say they are outright delusional at this point. How can you not concede defeat when the market has moved against you by such a humiliating amount for years now?
We have once again seen a spike in inflows and bullishness has sharply risen as per AAII and NAAIM, but I wouldn't say the bullishness is off the charts. The current situation in the market is tricky. You always have to respect price action when something makes new all time highs for it tends to signal great strength but the market is ST overbought again and there's been a surge in bullishness as mentioned which suggest the market is vulnerable again for another pullback, but I get the distinct feeling that a lot of "pros" even those who have been generally bullish, have been caught off guard by this market all year and have badly lagged the index. This to me suggests pullbacks will be relatively mild for the remainder of the year unless there's some really big negative surprise. I think the best course of action is maintain core positions and perhaps trim into this strength those positions that have not lived up to expectations. I have done that with CDH last week. I meant to discuss this company but after having a discussion with a former O&G CEO in Western Canada, I decided to sell it and was fortunate to get out at a marginal gain.
Update: I just read an article in the NP and I saw this comment
"The US just nearly averted the catastrophe last week by increasing the level of debt they can accumulate, allowing them to print more paper money which will buy them time (no pun..) before the next major deadline hits.
Everybody knows that its just a matter of time before the US economy, and most likely worldwide again, crashes face-first into the ground. Only THEN will things start to show signs of improvement. We still have to hit rock bottom before that happens though."
This comment shows the type of thinking that a lot of Main St. Joe Schmoes have about the economy. It's not a one off because I've seen many comments that are similar. If there's another major lesson I've learned over the years, and I've said this more than a few times before, is that you have to fade Main St when they are in opposition of the market's trend (but be aware that this is not a ST market timing indicator).
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