Full Steam Ahead Or?

The markets have been rallying rather strongly and fairly consistently. Nothing like the usual bullish-pop that often comes during a bear market. I would expect this rally to hit a wall after about a 35-40% move. So, there is still a ways to move up here. However, the BIG question being bandied about is whether of not we have seen the last of the big bad bear market. I have my suspicions. You can see the bullish tone wanting to explode to the upside as traders and investors are licking their chops at the market moving to new highs in the next several months. Really, the greedy are already spending those huge profits that will be coming over the next year or so.

Yes, it is tempting to say that the bull is back. A look at history tells us that this just may be the first of several bear market rallies that sucker the heck out of the always-bullish bulls. My bets are not so certain. I think there is still a lot of unknowns in the market as companies have less visibility toward earnings in the coming quarters. And, as we have seen over the last year and a half, there seems to always be another shoe to drop or some bad news lurking around the corner just when some company says the decks are clear.

I estimate that the GOV will be all but forced to ante up another $2 to 5 trillion to right the ship; i.e. keep it afloat. And that figure could be much higher over the next 2 or 3 years. And God only knows how much Obama will raise taxes to pay for all this government help. If the gov had been doing its job in the first place, much of this over usage of credit and the derivative catastrophe could have been avoided or at least tempered. Oh well, the best thing to do is to go your own way. Make your plans and plow ahead regardless of what the economy or the politicians say or do. They know nothing; or at least they know nothing that will make any difference to me and my wealth creation.

Areas to look at for trading include deep-in-the-money options on energy related stocks as well as some tech and maybe a few retail. Things like RIG, APA, UPL, AZO, RIMM, APPLE, and AMZN. Do not chase any of these. Wait for them to come to you in price. That is wait for a pullback to enter a trade. There are any number of stocks that can be traded in both directions. You don't have to be perfect in buying, but you do have to know when you are going to sell. And that goes for those stocks you have held for a decade or two. Why buy a stock, hold it for years and watch it go up and down? How can a sweet dividend save you when you stock has lost 20-60% in underlying value?

One thing that I think could happen is that we form a reverse head-and-shoulders pattern in the S&P 500. All we need is a correction back down to the November 2008 lows after we complete the current up-move. That would form the right hand shoulder and possibly confirm a bottom in this bear cycle. But who knows? This is still a time to be nimble as well as place a few longer term bets of selected stocks that will not fold. You can bet that companies like CAT, DE, CMI, AGU, POT, BTU, X and CLF will all eventually be much higher than today. The question is how soon? By the end of this year or the end of the 2010's (2020) or somewhere in between.

Any way, go your own way and make things work for yourself. The universe gives you all that you need and as you know, you are a creation of that universe. You have the power to create tremendous amounts of wealth if you so desire. Whatever you do, have fun and always look on the lighter side of things because after all it is only life.