Cash is King
The market was obliterated yesterday. Going back to Friday, I was hesitant to go long and I thought the indices would make another move lower. But I did not think that the move would be a nosedive directly to 1197 support.
In addition to the plummet, volume was also high. Over the past few weeks I commented on how unseasonably low volume has been. Sadly for the bulls, volume picked up yesterday.
The buzz in the air is that the decline was due to the inability of U.S. policy makers to construct proper budget cuts in 2013. Although I agree that the failure of Congress to formulate a proper budget and do their job was the reason for yesterday's decline, I do not think inept politicians will drag the market lower for the next month. Their failure is a minor concern.
But the market is at some very important support levels. If those break, the indices will fall by another 5 percent fairly rapidly. Our pathetic Congress may get the blame for the decline, but those budget cuts are an election away. And a lot can change in 13 months. While I am not happy about the lack of leadership in the U.S., our dysfunctional government is not a reason to bail out of stocks.
Europe is a big concern. The debt crisis over there will persist for the next few months, if not longer. While the situation is dire in Europe, it's not like the market is unaware of those potential issues. And if investors were that concerned about contagion, the indices would have fallen a long time ago.
So we are left to wonder what is going to drag the indices lower, because all of the major U.S. indices look ready to collapse. U.S. earnings were great and the recent economic figures suggested better growth than we expected. I will reiterate that the U.S. economy continued to grow, not contract. The double dip crowd is so wrong - like I've said all year long that they would be. Yet the indices are on the verge of another big decline.
In only the second time since TradeMaster Daily Stock Alerts' service inception, the portfolio is in all cash. The first time the TradeMaster Daily Stock Alerts portfolio was in all cash was also this year. That alone should tell you something about how strange the market has behaved recently.
Normally, I can and do trade in all market conditions. But the past few weeks have offered some of the most unpredictable price movements I have experienced. And I'm not the only one who feels that way. Nearly every veteran trader I have spoken with cannot wrap their head around the trend.
Unlike them, I have stayed bullish. However, while my mentality rewarded the TradeMaster Daily Stock Alerts portfolio handsomely in October, it has not brought the same marvelous gains in November.
The market should be finding support right here. But for whatever reason, it's not. And even though I should have began shorting stocks last week, I don't see a big fall coming. For the past three years, I've nailed every major market turn, but I may miss this current bearish turn. I am reluctant to be bearish right here.
