December 1st, 2010

Was November Like the April Peak?

I know it’s been quite some time since my last post and I apologize but, trust me, there just doesn’t seem to be too much to do right know but wait. I find myself nearly fully invested (over 90%) with many terrific stocks (80% show gains and 75% have appreciated more than the change in the benchmark S&P 500 Index since I bought them).

It’s at times like these, however, that’s it’s easy to become complacent. There are similarities between today’s market and the peak of last April which raises some concern. The moving average alignments are carbon copies, both indicating that a fully invested position was appropriate. And there are also some differences. The April peak ended a 60% move off the March 2009 bottom while the current peak follows a 25% off the July low.

The current situation feels to me to be more like a struggle at the upper resistance boundary of the market’s year-long trading range than a reversal top (click on image to enlarge).

Unfortunately, it wasn’t until May 20, when the Index itself closed under the 200-day moving average with a 3.90% decline did the indicator change to a clear sell. Looking back in retrospect, that 180-degree turn may have been a bad call since it was made very near what became the bottom support level of the trading range (and the right shoulder of the inverse head-and-shoulder bottom).

I haven’t seen anything yet to cause me to begin selling what I believe are excellent positions nor to reverse call for a move to 1320 by May and possibly 1500 by year-end next year. As a matter of fact, I take some comfort from a recent interview on Bloomberg with Barton Biggs entitled “Biggs Says Next Move in Stocks May Be `Up a Lot’“. I don’t usually refer to a “talking head” but Biggs happens to be someone with whom I often agree (or, if I were truly self-centered, he often agrees with me). If you’re like me, have a lot of money on the table and need some encouragement, it’s worthwhile listing to the interview.

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  • Anonymous

    guru,
    look like we are ready to go again for 2 weeks at least.. same chart as QE1 last year??