FROM NEUTRAL TO BULLISH ON STOCKS
Last night I outlined my opinions on the broad, macro asset classes. At the time, I posted my opinion of stocks as neutral. I did state that the gap down this morning would likely be a buying opportunity due to the extremes in negative sentiment. In the previous article, over the weekend, I also discussed how the deception mechanism in the market may be alive and well. This very simply means that we should hold the August lows quite easily. A change in stance, as I was initially expected these to break in September.
Following today's action, I am now bullish on equities instead of neutral. I will not be looking to initiate a position, however, as I am happy with the short long bond (long TMV), short Euro (long EUO) and short gold (long DZZ) positions I have. I may add to TMV long tomorrow. I believe yields are due to shoot up here soon.
S&P 500 could move above 1300 in the between now and mid to late October. This scenario would catch a lot of people off guard and have fund managers rushing to make up performance.
Don't discount the "I want to keep sending my kids to private school" phenomenon on Wall Street. Fund managers are desperate to keep their jobs in this environment. A sustained move up in the markets will have them all scrambling to make up performance during a year where many could be facing a future that doesn't involve the luxuries they have grown accustomed to.
Underallocation during a difficult year can lead to market moves that seem like they are powered by jet fuel and driven by juice monkeys.
Some thoughts to snack on tonight.
