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Most of what we react to is either real or perceived as
being real,...in my mind the "risk" in today's market
comes from that which as of yet is unknown. For instance,
in synch with the Full Moon and Winter Solstice, there were
two earthquakes the past three days,...a moderate one in
Indonesia,..and a stronger one in Algeria. Had one of these hit
the US West Coast or Japan,..the markets likely would have taken gas.
Such an event is not "in the market" so to speak...so you have
to be alert for a surprise. This media focus on Y2K terrorism is
another example,...how would the market react to terrorism?
Bottomline,..when complacency is high as it appears to be now,
the risk increases that a "surprise" can have a profound effect.
I do feel some sentiment measures are at an "overbelieved" extreme.
Daily and Weekly CBOE P/C numbers in the .35 area have occured
at tops in the past.....and almost all the past two weeks,...the equity
P/C ratio has been at .50 or below,...etc. Inv Intell Survey at 53.2 %
Bulls and 29.4% Bears is in the alert zone for "overbelief".
Although I use mutual funds as trading vehicles,...my focus tends
to be very short term,...next day or two,...and my strategy remains
twofold (as usual) going forward through the holiday season....
1. Go long the SP500 if a pulback occurs into a projected energy
point date,...i.e. pulback to a support level accompanied by an
increased level of fear, as indicated by high daily P/C ratio,..
and other short term measures of fear.
2. Go long overseas markets using an International fund if and
when overseas follow through to a move in the US appears likely.
Key timeframes to watch for a short term change in trend include
today 12-23,....and then 12-30 (which is a 3 week cycle turn,..13
mkt day count from 11-22, 11-03, and 10-15, etc), and then 01-07
(after New Moon on 01-06). Otherwise I am very content to be on
the sidelines,....as there appears no compelling reason to expect
a major leg up from this point in time.
Happy Holidays. JIM Pilliod jpilleafe@xxxxxxx
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