imported post
A interesting view of what the big money might be doing......... I'm not saying I agree with this article, just thought I would share it.......Maybe he meant dumb money , because it's the same thing I'm doing...hmmmmmmmmmm Any comments on this Tom?
If the 1200 support level holds Tobin Smith could/may be correct. Only time will tell but you must bet to play the hand.......
This is a free Article on his web site.
Part of an article dated the 3 August 2005
1. SHORT-TERM MARKET FORECAST: What's Not to Like? -- By Tobin Smith
It's that time in the market when I get the most nervous.
That's because virtually everything I was forecasting during the dog days of the market this year (you remember March and April, no?) are coming to pass.
Our GDP forecast is within one-tenth of 1%. Our energy price forecast (low end $44-$46, top end $58-$62) is on target. Our call on continued earnings understatements, undue pessimism by CEOs and even an announcement by October of the scenario for troop withdrawals from Iraq are on target.
In other words, I'm worried because things just don't go this right.
Now some smart people would say, "Don't fight the good news -- enjoy it. Sometimes good news is simply that -- good news."
PARANOIA WILL DESTROY YA
I'm trying, but paranoia is a powerful disease. We may, in fact, be in a runaway bull market. I just feel better looking over my shoulder.
Here are a couple tell-tale signs that you need to look for:
1) ENERGY STOCKS: If we see sell-offs on good numbers and reasonable guidance, then another correction in the energy patch looks nigh.
That would be GREAT, but so far we are seeing no "whisper number" sell-offs.
Look at the list of new highs from yesterday -- more than 100 of them were from energy companies. Of course we have made most of our money in energy investments, buying them when there were only a dozen or so new highs.
But then again, that was the case just two months ago.
2) M&A PLAYS: Reebok and Adidas. Total and Deer Creek. Chevron and Unocal.
When was the last time you saw BOTH the buyer's and the seller's stocks go up on acquisition news?
When this phenomenon turns around, it's correction time.
3) TECHNICALS: Technicals are overbought and overwrought. Sam Collins, our technical analysis guru, shares my paranoia:
"While the S&P 500 barely made a new high and the Dow is still playing around with the 10,700 area, technology buyers rushed in to break the Nasdaq cleanly out of a triple-top.
"Under normal circumstances this sort of thrust usually leads to much higher prices, but in the absence of a follow-through from the other averages, it could also mean that tech buyers have created a divergence or 'non-confirmation,' i.e., a situation where one index runs ahead only to be quickly and decisively reversed.
"This breakout looks suspicious for another reason, too, and that is the relatively light volume that accompanied it along with upside breadth of just 3-to-2.
"Some might counter that the Dow Utility Average made new highs, as well, thus confirming the breakout of the Nasdaq. But the Utility Average represents a very narrow segment of the economy, and even though it is a good predictor of good economic news, it should be accompanied by either the Transports or the Industrials, so the Dow averages could also be in the throes of a non-confirmation.
"We should be alert to the possibility that we could still be facing a very tough time of it in August since divergences are almost always bearish. Meanwhile, take profits where you can and keep moving up the prices of your stop-loss orders."
Attaboy, Sam -- spoken like a true paranoid!
MORE SIGNS TO WATCH
4) SMALL CAPS AND TECH: What's running the most (beside our beloved energy complex stocks, of course) are small caps and technology -- i.e., the high-beta (volatile) plays. This smells a lot like hedge fund money pounding the table.
5) SMALL BIOTECHS: Small biotech stocks are on the run. I have been trying to add three VERY speculative but huge-potential biotech stocks to our Legacy buy list in ChangeWave Investing, but WOW -- they are moving up and down 25% a WEEK. The animal spirits are definitely flowing, and when that happens, the highest risk/highest potential reward stocks start levitating.
6) INVESTOR SENTIMENT: Sentiment readings are more bullish, but not TOO bullish.
7) HURRICANE SEASON: Let's not forget that we have 14 tropical storms and at least eight to 10 hurricanes forecast to hit the U.S. through November -- which means energy prices are pretty much locked above $55 till year-end.
My best gut answer to what's going on here is big money is anticipating the year-end rally NOW and isn't waiting.
Remember last year -- flat market till the election, then BOOM. If you were running billion dollar-plus funds, you were caught flat-footed. And by the time you put your money to work, the market sold off, anticipating a similar end of January sell-off as the one that happened a year before.
Many big money players got whacked by missing the 2004 year-end run -- and then got whacked again with the January sell-off. And let's not mention the hedge fund-led profit-taking orgy in energy that started in late March with the oil price correction. When we were BUYING energy stocks at 20%-30% discounts during panic selling, some big money playas were getting their THIRD market wedgie of the last six months.
Don't tell me big-money investors do not have a very good memory. I can tell you every week that our ChangeWave portfolio has been UP or DOWN 10% since we started -- these moves leave a mark, baby!
What I really see happening is big money anticipating an end of the Fed cycle (at 4%) AND the strong numbers in Q3 (which hit the tape in Q4) and getting the money on the table NOW.
What we want to look out for is a runaway market that will make the performance-paid side of the money game (the private hedgies) quickly leave 2005 with their profits and performance fees locked up.
When we get to an S&P 500 gain above 10%, lookout for a quick-and-ugly correction.
But from here to then, let the money ride.
When the list of new stocks hitting 52-week highs is long, your buy list should be short.
We are concentrating on the left-behind stocks in:
* Exploration services
* Emerging wildcatters
* Unconventional energy exploration and production
* Alternative energy infrastructure
* New secular supply/demand imbalances -- like titanium, nickel and uranium
As well as leaders of emerging secular billion-dollar ChangeWaves in:
* RFID
* Hybrid vehicles
* Wireless broadband infrastructure
* White-light LEDs
* E-health records and digital diagnostics
* Disease treatment breakthroughs
Moral of story: It's OK to be paranoid, but not TOO paranoid.
Good news is being valued as good news -- and that's … good news.
Just remember that when you start to think you really are smarter than everyone else, it's time to take profits and prove it.
Toby
Not time to buy weakness yet. :^
Like shooting fish in a tea cup.
