Birchtree's Account Talk

My investment adviser, Mindylou, reminded me today that the U.S. stock market historically has averaged at least 3 declines a year of 5% or more, and one fall of 10% or more. It is positive that the market background noise continues to keep scared money away from investing, just as has been the case for the past for many months where every consolidation breeds panic sell commentary. Which is great for a stocks stealth bull market, the longer scared investors are kept in a perpetual state of fear, the greater will be the bull run. Today will get more people nervous. The market continues to allude to a multi-year bull run and the Dow may target 16,000 by year end. It's a long year yet.
 
March, April and May are seasonally the strongest months of the year for the S&P 500. Last year my oceanic gave up -$44K for the month of April and -$447K for the month of May. Don't tell me I have to endure that again - I suspect April will even out next week and May could be very strong, so I'm a cycle rider until the storm passes.
 
The stock market usually makes rounded tops and spike bottoms. The reason is that the complacency that is prevalent at stock market tops brings about quiet trading, while the panic of a dramatic sell off to a climax bottom makes a sharp bottom, followed by a steep rebound as money starts rushing back in - I anticipate a very busy Friday on the buy side. Even though we've experienced a 139% gain from March '09 lows, many investors remain highly skeptical of the equity market - that's exactly what the bull wants. Continuing to worry about a vicious downturn will keep'em away. What a wonderful bull market. I need to go to the barn and get me a really big sniff of that sweet smelling superlative bull manure. I sense a hard and fast up move coming next week.
 
Now this is cool - can 50 million Frenchmen be wrong - you bet. Brian Pretti says that recent research from some of the highest bonus paying investment banks the Street are suggesting that before this cyclical bull inside a secular bull has run its course, the public will essentially have no choice but to uo equity allocations meaningfully. It appears households have become very risk averse in their investment allocations for the last several years. I've never seen an equity market up as much as we have experienced since the March '09 lows without the public beating down the doors to get into equity funds....until now. They'rer still beating down the doors, but this time to get out.
 
So far it looks like April is taking it to me - pain: -$162K, +$85, -$96K, +$10K, +$42K for a give back of -$141K on the week. It'll be interesting to see how April ends - I'll be happy with anything positive. If we are going to trap some bears next week could be explosive and return my gains.
 
Mindylou says both Intrepid Timer and ebbnflow are playing with chump change in their respective systems - she says we got the real deal here. Just look at the amount of money the oceanic gave back last week - could any of their systems touch that. We are of the permabull buy and hold persuasion and proud.
 
"In years past, the yen carry trade powered big investments in commodities and commodity currencies, but when you borrow Yen, who says you only have to buy commodities. It's a funding currency and those funds will pour into what's working, and that continues to be the high dividend paying stocks."

Growth Scare | Ryan Puplava CMT | FINANCIAL SENSE
 
Over the past year, investors have pulled $22 billion from U.S. stock funds and added $339 billion to bond funds - I believe it will be proven that exodus is premature. The U.S. is at the beginning of an industrial revitalization that most analyst only have begun to recognize. Some industrial earnings to be reported tomorrow may provide a possible hint for a stronger economic second half.
 
I've been a proponent of large caps for several years to the point of being tendentious. So here I go again. Based on the relationship between the SPX and R2K, relative performance between large and small cap stocks follow long term cyclical trends. Periods of outperformance and underperformance by either category are measured in years rather than months. Even with the typical cycle lasting several years, though, the current cycle has been the longest of them all. After peaking out in 1999, large caps have been consistently underperforming small caps for 14 years and counting. When it ends is anyone's guess, but it's hard to argue that large caps are at least due for their day in the sun - I remain 20C/80I for the next couple of years.
 
"A fundamental investor will normally ride out a correction in a bull market while a technician will get stopped out, having then to buy back at a higher price."

The Danger of Ignoring Technical Analysis | Clif Droke | Safehaven.com

Um, not true... bad technicians may have to buy in at a higher price, but not true technical traders... oh, wait, you were talking about INVESTORS... big difference :)

And, according to your psychology, there has never been a bear market since the market has always been higher than in the mid 70s... hmmm

A bear market, by definition, has been here twice in the last 13 years... The damage the fundamentalists suffered was evident, technicians make money during a bear market too, where most fundamental investors do not.
 
Do we have irrational exhuberance yet - not hardly. We are some distance away for stocks. Now eventually a bear market in bonds could trigger a massive meltup in stocks and that is yet to arrive. Stocks as measured by the SPX have rallied 139% since hitting 12-year lows in March 2009, the move has taken place with shell-shocked retail investors largely absent. They shouldn't be expected to return massively anytime soon, either. Don't be surprised if we close up over +200 Dow points today.
 
April 1999 was the first and only month for the DJIA to post a gain of 1000 points - May 2013 will be the second month to post a 1000 point gain. Don't I wish. Knowledge has marked the difference between those that take informed risks and make money and those that remain petrified by fear in a perpetual state of inaction. It sometimes pays to be patient and dedicated to a long-term, disciplined investment strategy. I'm staying with the I fund because Europe will play catch up.
 
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