Monday, April 06, 2009

The suspense is killing me

The S&P 500 index is tiptoeing along just below a threshold that will make the long-term component of my timing model start to turn from bearish to neutral. Meanwhile, as has been the case before in 2009, my sentiment readings are about as optimistic as they can be, which is bearish in short/medium term. Since the March-April rally has been slowing down but not stopping or reversing, the market may remain in this frustrating limbo for some time to come.

I don't really care which direction the market ends up going. I simply want it to give clear signals either way before it makes a big move so that I can profit from it. Take note, though, that with a dividend yield of 3.5% and forward P/E ratio of 19 for the end of 2010, the S&P 500 index is still on the expensive side of the historical average, so stocks are probably not good long term investments right now, even if this is the beginning of a bull market rally.

8 comments:

Zach said...

"give clear signals either way before it makes a big move so that I can profit from it." DUDE! we're up 20% in 4 weeks. If your model missed that then it's time to tweek the model.

Jody Wilson said...

Zach,

I can't predict every month-long wiggle in the market - I doubt any model can. Besides, I did actually cash out 50% from GRZZX near the start of the rally and then got back in at a better price, so I took at least a some advantage of it. If I ultimately cash out of my current GRZZX position with a profit, then I don't really care how many rallies and declines I have to ride out to get there.

Anonymous said...

My husband and I are very happy to wait for your assessment of clear signals.

We can't afford to wrangle with wiggles.

Catherine W.

Anonymous said...

Hi Jody...

100% short seems a strange position to be holding with such a sense of "suspense" and with no "clear signals". I do not understand why you are not market-neutral as you await more certainty.

Regards, Jeff

Jody Wilson said...

Even if the long-term bull market signal trips, sentiment is still creating pressure for a short/medium term decline. After all, there are corrections in bull markets.

However, the long-term bull market signal hasn't even happened yet. Thus, I remain in GRZZX.

Anonymous said...

Thought you might get a kick out of this site...

http://quantifiableedges.blogspot.com/

...a bit of a quant take on TA. Intersting stuff.

Anonymous said...

Jody, early last year your models predicted an 8,500 DOW and an 940 S&P. A lot has changed since then. What do your models show now?

I am still of the belief that this is a bear-market rally. In fact, given how severe the drop has been, this serious rally is long overdue. I think 900's are possible before we resume the downturn (reality check, GM bankruptcy, UI figures, other surprises ....).

Thanks,
-Jay

Anonymous said...

On your earlier post, you said:

By the way, one of my end-of-bear-market signals would trip if the S&P 500 closed in the vicinity of 850, which is less than 4% higher than today's close of 823. I won't say anything more about that unless and until it happens.

Are we at the end of bear market yet?