I'm in until I get this SELL signal
Will the market crash, soar or limp along in 2014?
The expert consensus seems to be that the economy is on the verge of an upswing that will begin to make itself known sometime this year (though maybe not until late in the year).
I assume this expectation is already priced into the market.
We all know that ultimately stock price is based on earnings (real and prospective). A strong economy means strong earnings and so on.
Therefore I would expect the market to have another excellent year if, in fact, the economy (especially employment) shows real signs of a meaningful rebound.
I would expect the market to limp along if the economy does the same (as is happening so far).
I would expect the market to have a major correction, perhaps even a major crash, if it begins to look like instead of the expected economic recovery we are heading back down into recession.
What this means is...
If bad (not just mediocre) economic news comes out that points to unhappy days ahead, the market will take a big hit. At that point I would be a seller, greatly increasing my cash position. For if more bad news follows, it will keep going down. A LOT. Of course the first bad report (or two) might be an outlier and good news will follow and the market will rebound and I will have to jump back in at a higher price than I left. But that would cost me maybe 10%. If the news continues to be bad, the resultant downside will be A LOT worse than an additional 10%.
That's my story and I'm sticking to it. For now at least.