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Top or just a breather...

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May 13, 2009 – Comments (4)

I have been watching the market move relatively sideways for the past week.  Yes, there have been some volatile day-to-day movements, but the overall movement has been sideways.  Granted a week does not make a trend, but it does beg the question as to whether or not this is the top of a Bear Rally or just a breather prior to another climb in what the Bulls hope is a new Bull Market.

I have not been around long enough in the investing world to make bold predictions regarding the direction the market and the economy will take, but I do know enough to make observations and determine that something is about to happen in the market.

The last time there was this kind of volatile sideways movement coupled with negative sentiment in the media, the market started to drop rather dramatically.  The news over the past week has been mixed and rather lack luster compared to the hype in previous weeks.  The media types all seem to agree that a breather is in order after such a lengthy run up.  It would seem natural that there would be some profit taking and consolidation by the big investors and those hoping to lock in their gains.  But the language the media uses typically reflects the things to come.  When they are upbeat, things tend to move up. When they are down...the market tends to follow.

That is the herd mentality at its finest.  Given that foreclosures are up, unemployment is up, consumer spending is down, and earnings seem to defy the fundamentals, are we on the brink of a major downward correction?  Someone smarter than I will have to answer that question.  The Bear in me, is starting to think that the smarter bears out there that have been calling for the rally to have a correction and a big one at that, may not be too far off target.  Things seem to be setting up for a drop.  The Bull in me, hopes that this is just a breather, and that once things settle down, the consolidation is complete, and the profits have been locked in by those doing so, the hope is that the market will continue to climb.

Unfortunately, hope is not an investment strategy.  Hope can save a lot of things, but a portfolio isn't one of them.  I am sticking with my selections on CAPS as I am not too confident in my ability to play the role of a Bear, but I am thinking that we are about to see some serious movement in the market within the next week or so.  About the only thing that would turn the tide on my way of thinking at the moment is a major positive catalyst, and I can't really see any out there.

So...smarter Fools...comment away.  Educate me on what may be coming in the not so distant future that may prove the Bears wrong.  Or is it time to start making some red thumbs? 

4 Comments – Post Your Own

#1) On May 13, 2009 at 10:03 AM, skeptic86 (95.51) wrote:

Im no expert, but I cant tell you that the media isnt a good indicator. If anything the market is an indicator for the media. If the market goes down, the media will find a irrelavent reason for it going down. Same if it goes up.

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#2) On May 13, 2009 at 10:10 AM, MikeBobulinski (< 20) wrote:

I don't disagree, but I do look at the tone the media uses as an affirmation of the direction the market is going to head.  The media has been a bit on the negative side through the sideways move, and that usually means they are about to sensationalize or over report on something to drive the lemmings even further towards the sea...

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#3) On May 13, 2009 at 10:29 AM, russiangambit (29.44) wrote:

Well, you know I've been waiting for a pull back ever since 850, so I am not a good indicator.

However, this type of sideways move is a sign of uncertainty. It means the the market is waiting for a catalyst to decide which way to move. It can either be a consolidation and move higher or a roll over and move lower. Today news was bad and the market moved  lower. It is starting to look like a roll over, at this point. There isn't a reason to buy since now it appears to be clear to everyone that we are not going to come out of the recession in Q2 ( which everybody was promising just 2 days ago) , since consumer is retrenching and the inventories are still falling.

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#4) On May 13, 2009 at 12:37 PM, iamnik77 (96.17) wrote:

I would say this is a breather to a painfully slow climb. The Dow will so slowly climb to 10,000 it will feel like watching paint dry.

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