Saturday, March 16, 2013

Quo Vadis SPX?

Some say SPX is headed for the moon. Well, that was bit of an exaggeration, but surely we hear talk of SPX 2000. Personally, I think a long term top can be found around 1600. The question that I ask, whether that long term top is now or still few months down the line.

While many are pointing to various extreme reading of various indicators, I do not see any sign of correction yet. Only once so far the sell signal was triggered but that did not match with my other indicators and I decided not to short even when the sell signal was on. On hindsight, it was a good decision because had we been short, it would have caused us emotional pain and in some cases, the short positions have been puked already resulting in actual loss.

While I am advising subscribers not to short and stay on the sideline, for some of you who are short already, I would say that bear the pain if you do not want to book the loss. Nothing goes up for ever and this moon rocket is also subject to the law of gravity. Ben and other powers that be think that stock market is equal to economy and a higher stock market means a strong economy. So the never ending money printing and inflating the balloon goes on. We have seen this many times in the past.

And we know how it all ends. This time is never different. Only we do not want to front run and get run over.

So far the bubble has been formed in Equities and we have not yet seen the rise is other asset prices like Oil or PM sector. Before the bubble burst, we will see all these asset classes rise again. Oil should take out its all time high and gold should make a new high. Question is when. For now, the BOYZ are working on a simple plan. That is to get the retail and lagging fund managers move in to equities. It works on the simple hope that some else will buy the stocks at a higher price at a later date. If you don't believe, just look at the chart of Apple few months back. When Apple crossed $ 700, they were  talking about Apple $1000 and folks who bought Apple at $ 700, were hoping to flip it around soon. Same story now with something else.

Dow ended in red this Friday after 10 consecutive weekly gains and 8 new all time highs in a row. And SPX is trying to make its all time high. I think it is so damn risky to go long here but also not the right time to short. Not yet. There are other fish to fry in commodities and there is less risk there.

The blog posts have been irregular and my apologies for the tardiness. I intent to post at least two/three times a week but time is difficult to come by. In any case, I did not have much to say since my last post except repeating that:

Cash is King.

Have a great weekend folks.