SOME NOTES FROM A MARKET UNDESERVING OF THOUGHT
It may seem somewhat contradictory in nature than I am putting together a series of notes about a market that I consider undeserving of thought. What I intend to convey by labeling this as a market undeserving of thought is that in bull markets thinking has a tendency to do more harm than good.
On a day to day basis it is becoming increasingly clear that market professionals especially have become prone to discounting this bull market, preferring to prepare for its demise rather than benefit from its prowess. I have been guilty of it. A vast majority of the pundits I read have been guilty, as well. It is indeed the market professional or experienced investor that tends to under-perform in markets of this nature, while those who perform less in the way of critical analysis tend to outperform.
The reasons why should be obvious. One very simple word: Thought. The necessity to critically analyze is the hallmark of the market professional. When critical analysis is absent from the routine of the market professional he or she feels as if the job they have dedicated their professional life to isn't adequately being done. That feeling of inadequacy results in a continuous cycle of analysis.
The problem is that analysis within strong market trends, be they bearish or bullish, inevitably will lead to premature decision making that counters the prevailing trend. Countering the prevailing trend leads to a loss of capital. A loss of capital leads to questioning and refining the analysis, when in reality what is in question is the foundational aspect of whether any analysis is necessary at all.
So without further ado, allow me to present pieces of analysis that are completely counter to the prevailing trend:
- The Nasdaq Composite is caught in between some key trajectory points. Very obvious congestion area. How it handles this point will be extremely important to the short to intermediate term bull trend.
- The selloff in the Dow Transports is of some concern. I will have an updated chart this weekend. However, both the volume and nature of decline are short term negatives for the market. Transports, alongside financials have been the leaders of this bull run. Important that they continue smiling.
- A question I keep asking myself is at what point does the weakness in Emerging Markets become a concern? Or are we at a point where Developed Markets are now seen as prudent with Emerging Markets much less so?
- The Russell 2000 is pausing right on its generational trajectory. Here is a look at that trajectory from a chart I posted last month.
- The high on the SOX was exactly at its generational trajectory. Here is a look at that trajectory from a chart I posted last month.
I probably shouldn't be looking at these things, instead spending my time finding high beta technology to buy into. Unfortunately, my tolerance for risk simply isn't great enough to allow the trend to have its way with me, without some semblance of balance that has come from watching loving bulls turn into seething demons with the snap of two fingers.
With that said, I remain approximately 75% long with 25% cash, in a portfolio that hasn't really done a whole lot this year relatively and absolutely speaking.
