Additional evidence is accumulating for a pullback starting this month. In "Second Half", posted here on July 1, 2007, I discussed some economic and historic data favoring a decline of more than the usual 2-3% we have grown accustomed to since March 2003. Shorter term data are now beginning to appear as well.
My own short and intermediate term sentiment measures are finally showing some frothiness of a degree nearly adequate for a decline. Also several excellent neural network folks I respect are reporting that their forward projections are weakening.
Within each month US stock markets tend to bottom in the middle of the week before options expiration and peak just after expiration. Don Wolanchuk has long and correctly trumpeted this very real phenomenon. http://wolanchuk.com/
And I want to return to the historic "7 year" of the decade and the annual tendency for a July top and an October low. (Remember or refer back to 1957 and 1987.) There is also cycle evidence of several types consistent with a possible decline this month.
Sentiment, or the "animal spirits" of Adam Smith, can always shove the statistical or historical evidence off the stage and into the wings without shame or blinking, so don't throw everything out at once. All investment or speculation is a judgement call. But I am lightening up again on the long side. I have done this four or five times since 2002, and several times it has cost me some gains opportunity for a while. But that is my preference at this stage of my life: not to maximize risk and profit but safety and income instead.
If I am guessing right, we will have a turn down of some meaningfulness next week into August and possibly October.
It's summer and very hot, so I am heading for the hills for a few weeks or more in cooler northern New Mexico USA.
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