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Sell in May, and go away.

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June 01, 2009 – Comments (6) | RELATED TICKERS: GM , JPM , GLD

It's June already. Time to sell up.

I am with binve, ultralong and several others - I think we're nearing the top of a bear market rally. My CAPS rating is tanking since I clearly called this too early, but I still think it's on the cards.

However I don't think we are due a substantial drop immediately, unless there is catastrophic news. And I mean catastrophic. GM going bust was expected and doesn't count. JPM going bust - now that would qualify. As would a major war, a huge terror attack, massive natural disaster in the US or maybe the Gulf. I don't think any of these is likely, so I don't think massive stock devaluation is likely either in the next month or two.

I see sideways action, mostly lower, but not down much below 800 on the S&P for the summer. So not much benefit in short positions, even less in long positions, unless maybe it's gold, silver, oil or Yen. 

Longer term I agree with those who think earnings multiples need to drop into single digits. But... remember those earnings are measured in dollars, so that might well happen without the S&P ever dropping back below 700. 

As I said previously, I'm worried about inflation, so going to cash isn't a good option. However, most of the safe-ish havens above are looking a bit overbought right now. Currently I am in stock and hedged, slightly short but not very. This is costing me money. If anyone thinks they can convince me of a better place to be, please try. I am not about to buy gold at these prices, but I like it, just waiting for a pullback.

6 Comments – Post Your Own

#1) On June 05, 2009 at 8:07 AM, Alwaysgolong (< 20) wrote:

Rec for you.

Thanks for the insight. I'm leaning the same direction.

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#2) On June 05, 2009 at 8:31 AM, binve (< 20) wrote:

arboretum, I didn't see this post when it first came out. Sorry about that! But I think my response to you an my blog is appropriate here too. I think everything that you describe above will happen, just after this last bull run finishes itself out.

I tend to think it is a 5th of A wave, others see it as an ending C of a double zigzag. Either way. The move is nearing completion, but there is still some more upside potential for 1-2 weeks before a larger move down (the one I am waiting for).

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arboretum:

Binve - you've gone long! What gives?

My CAPS ranking has gone from 99 to 82 in the last few weeks since i went short - did you throw in the towel? Or did the count turn bullish short term?

binve:

arboretum. LOL! No not quite. I said I have closed my shorts. That is not the same thing as going long. I have some very small long postions for trades (mostly in energy, ERX, UCO), as some VERY short term trades. But I am >90% cash right now.

But I am now more bearish, more than ever. But the topping during May has turned into consolidation for a Wave 4. I think we are now in a Wave 5 up. So even though it pained me to do so. I closed my shorts *temporarily*. If the bulls want to continue the rally, be my guest. It makes no sense (the fundametals still stink and PEs are now getting back up into the nosebleeds). But the market will do what the market will do. Which is fine by me, because it gives me an opportunity to re-short from higher levels :).

So to answer your question, yes. I think the short term count is bullish, and the S&P has a decent shot at 1000 in the next 2 weeks. I am waiting for a clear trend change to re-short.

I don't know if you have seen TastyLunch's newest blog. But Tasty, portefeuille, and myself have a very good discussion in the comments section. You should check it out.

Thanks!

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#3) On June 06, 2009 at 3:33 PM, binve (< 20) wrote:

arboretum, I have another response for you in my post, but I will post it here too. Take care!

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arboretum, Check out my pitches for ERX, XTO, CHK, TNA, and TYH. This give a pretty concise statement of my opinion on the rally and why I have temporarily green-thumbed these.

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#4) On June 24, 2009 at 5:15 PM, arboretum (27.93) wrote:

Thanks binve! Looks like this is mostly coming true for both of us, my CAPS score is less shameful recently.

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#5) On June 24, 2009 at 5:24 PM, binve (< 20) wrote:

arboretum: LOL! Yep. In fact I have already closed all of those old picks and made 6 new ones:

TWM, SDD, DPK, TYP, EDZ, and ERY

Check out the pitches, I think you will like them :) Here's to a rising score :)

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#6) On June 24, 2009 at 5:44 PM, prose976 (< 20) wrote:

I disagree.  Who exactly is selling in May and going away?  Maybe there is one big quick sell-off by the BIG BOYS, but that's only to scare away the little mice.  All summer long, they quietly increase their positions so they can cash in, while the rest of us would pay a premium that has been lovingly cooked into the stocks we would then buy.

I say, continue buying all through the summer, in small lots, adding to your positions.  Then, when summer is over, the BIG BOYS will pay premiums right along with the rest of us.

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