End of the year Psychology

[FundSurfer]

I'm beginning to think about end of the year psychology. Last year we had everyone scared of a big drop at the beginning of the year. We'd had a big drop at the beginning of the previous year. Prior year to that we had a big drop in the middle to late January. It seems to me that people look at the prior year and try to anticipate the drops which moves the drops forward.

End of the year psychology has to start with the big fund managers. They have to think about end of the year reports and what their portfolios will look like to investors. Did they have winners or loosers in their portfolios? They will be trying to window dress their portfolios with winners and ditching loosers in an effort to make themselves look as good as possible on paper for end of year reports. Also fund managers who have done well will be trying to lock in profits so that their year end return looks good.

Secondly, end of the year psychology has to consider the big hedge fund managers who also are aware of this trend and like to take advantage of situations where people think they know what will happen with the market. Last year was an example of hedge funds taking advantage of this scenario. Everyone got out of the market prior to the new year in anticipation of another new year drop. Bears shorted the market in anticipation. Then on January 3, hedge funds bought the market big, shorts rushed to cover and people on the sidelines rushed into the market to try and catch the rally. It made for several days of good pop in the market followed by a profit taking week later in the month.

What's going to happen this year?

Well yesterday kind of put a kink in my thoughts. I figured we'd rally till middle of December and then see a decline to the end of December. My plan has been to let the charts tell me where to be -- overbought then on the sidelines -- undervalued then in the market. This will probably continue to be my plan. I think that since we have had a relatively good year that mutual fund managers will be trying to lock in a good year since many did not do so well last year. This may actually be what precipitated Monday's decline and could keep the market moving sideways or in decline. I expect a nervous market for December as people are very wary of loosing profits and will pull out quicker than they will get back in. If you've got a good return for the year as a fund manager, you may be less worried about making sure you have the right stocks on your end of year reports.

As to the beginning of the year, I don't see a big swing in either direction. Everything could depend on December.

Any thoughts?

 

[Birchtree]

Moderator Griffin is probably counting my posts again today but who gives a sheet.

IMHO the MCSUMs are suggesting that the current intermediate term rally phase will continue to the end of January to the beginning of February. The bullish trend is still intact. BPI is suggesting new all time highs for the Transports and it could be weighted on the airlines. I'm in up to my eye balls.

Dennis

 

[Griffin]

FS,

I think you nailed it, and Bernake backed you up

http://biz.yahoo.com/ap/061128/bernanke.html?.v=6

There's no reason for the trend to end as long as things remain in balance. The task is knowing which trend is going to be the most relevant at any given moment. The most successful strategies have revolved around the analysis of the market's reaction to support and resistance. I don't see any reason for that to change.

The one trend that has permeated this year is: important events have not been market movers - so I won't deviate from what the charts suggest.

Considering the election, Rumsfeld's resignation and N. Korean nukes were non-events yet the Consumer Credit report was - you have to accept that the market will do what it wants in spite of any logic or rationale. It will move when and where it want's and find the dumbest excuses to do it.

Again...you answered yourself very well - do what the charts tell you and ignore the hype. Chem Eng said this about the election and he was right - same goes here.

 

[Griffin]

Moderator Griffin is probably counting my posts again today but who gives a sheet.

Birch, I don't want to reiterate all this here, however, this is as good a place as any, I guess. Please note that I have not used any of my moderator authority to gain an advantage in this discussion - I have not edited or deleted any of your posts or any way manipulated or controlled your access. I am addressing my annoyance with your stream of concious posting style the way any other member of this board could, would and have (so many times).

Have you noticied that you are the only person who seems to be satisified to agree to disagree? Nobody else is saying that too you. The problem is that every post you disagree with - you voice your disagreement. We all are very aware of the fact that the only thing you can agree with is that the market can go up......believe it or not (and I know you don't), the rest of the folks on this board actually posses the intellect to analyze the other side of that coin and would appreciate it if you did not continuously interfere with that process.

 

[Birchtree]

I totally don't understand - especially (so many times) is beyond me.

Why is it that my thread has had over 600 views in the last 24 hours - do folks just like drama. You're a timer and I'm a holder - that's the only difference. What do you think the ratio is? Thanks though for not being exploitative - that shows character. We agree to disagree on strategy. There is an ignore button somewhere available to all members and no one needs to unnecessarily suffer with annoyance. Are we kosher?

 

[Griffin]

I totally don't understand

Never a truer statement was spoken

After the post I made, you are actually asking me to agree to disagree....that's called a rhetorical question which means you don't need to respond to it.

 

[robo]

FundSurfer,

All I can say is the Market always seems to catch us off guard and suprise us.

Nice post! I agree that we just need to follow the trend, the charts, and not worry about the rest.

 

[FundSurfer]

...I figured we'd rally till middle of December and then see a decline to the end of December. My plan has been to let the charts tell me where to be -- overbought then on the sidelines -- undervalued then in the market. This will probably continue to be my plan.

We are now at the top of the short term channels. We are above some of the long term channels (except S has some growing room). I'm still thinking this market uptrends for another week but getting weaker.

I'm diversified with 40% in G/F and 60% CSI.

 

[FundSurfer]

Taking todays action into account and thinking about end of the year, I'm thinking we could drift sideways or slightly down from here. I don't think we'll see the big sell off that some are predicting. We could see a bounce tommorrow that is Santa related. I ain't gonna buy cause the first day of the last couple weeks has been whacked.

Thinking about the beginning of next year, with predictions for a good year next year we could see some good pop early in January.

 

[James48843]

Whatever goes up, must come down. I remember that from my student pilot days. And from my dabbling in the market in the months just before October 1987's rather hefty decent.

Conditions today are not like 1987. However, that said, we've had a frothy runup for the last six months, and the market is due for a rest. More than due, actually.

Take a look at the survey results so far today:
Bullish (up) 47%
Bearish (down) 26%
Neutral 27%

Darn lot of people who are neutral, yet still an almost 2-to-1 sentiment in favor of bull. That is another flag to look REAL hard at where we are today.

Markets closed monday and tuesday. Tuesday a national day of morning. The last six months on an express train higher. My account sitting at an all time high. Hmmm...

Greed kills. Pigs get fat but hogs get slaughtered. A bird in the hand is worth a coupl of bushes. Something like that.

Is today the day to take a lot off the table and be content that this has been a very, very good year?

Perhaps.

 

[Birchtree]

The current composite NYSE weekly A/D MCSUM confirmation greatly reduces the probability of any major price damage over the next several weeks and the probability of further price gains over the next couple of months is favorable for the bullish case. Over the past 65+ years, significant price declines do not commence when the weekly A/D MCSUM is rising and comfortably above +1200. We are now at +1363 - be right and sit tight. Snort.

Dennis - permabull #1