Stocks are creeping up and the 2CS (five day running total of each day's VXO times each day's CBOE P/C ratio) remains above the level expected in a bear market rally or even in a bull market. Pullbacks have been frequent enough but mild enough to prevent market sentiment (2CS) from getting overdone. I thought May would be it but July or even later looks increasingly probable.
I have played this late but with proxies for stocks, such as commodity-related issues, closed end funds, and corporate and foreign bond funds. I am beginning to take some profits where they are strong and where there are questions about certain items. I have owned all of the US oil and gas trusts plus Canadian Oil Sands but have sold out the latter plus San Juan which has some continuing legal problems plus low returns and low reserves. These are just examples of what to do as prices are rising. I have more on my limit sell list.
At some point I am going to have to cut back a lot more since I do not see this as a new bull market which will last for years. If I were 25 years old I would probably stick with it and take the risks, but I'm not and I can't. I think it was Bernard Baruch who said he got rich by getting out too soon. I have a good solid 8% gain on the year, up over 11% since the early March lows. That's a lot of money I don't want to give back.
Even the high yield vehicles are all "stimulus related" and price-vulnerable on stock declines. We can keep them through the thin times and get the income, but our total asset values will take a bigger hit than the income received. If it were easy, no one would have any money problems. The solution is to make more than you lose in investing or trading. Buying low and selling high and getting out "too soon" sound stupid but are full of winning wisdom. A little more fear than greed also helps. I hope I can stick to plan.
Of course I could be wrong on the economic and financial fundamentals, and perhaps the Federal Reserve and Government bailouts and rebates will lead to a glorious future with the SPX over 200o in a year or two. My brain and stomach tell me I shouldn't take the risk of betting on it for too long.
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