Stock Market Turning Up?
The stock market's turning up. Is it time to ride the bull to wealth and happiness? Or is a bear market still lurking out there?
I'm bringing this up because I've decided to start incorporating more specific stuff about what's happening out there in this blog - stuff like what's up with different markets. Of course, none of this is meant to be any kind of advice. It's just information I sift through all the time. Some of it helps me make decisions for the accounts I manage.
So from time to time, I'll pass on some of the more specific day-to-day sort of thinking that goes on in my brain. I've avoided doing that in the past, because so many blogs just sort of spit out daily random thoughts or rants, and since I don't have much interest in that sort of stuff, I figure you don't either. So I'll try to keep these "specifics" under control - no rants, unless I'm really pulling my hair out - and nothing too technical or boring. We'll see how it goes.
Anyway, the stock market gave a nice positive signal recently. Basically, the Dow Industrials and the Dow Transports topped their previous June highs - both on the same day.
It's an interesting development, since the stock market really behaved badly recently. Technical indicators of all sorts were saying "Watch out!". But I've learned that you've got to be careful about making major decisions on where to invest you money, especially when the evidence is short-term in nature.
With that in mind, when indications were extremely negative I just became vigilant about the stock positions I held. I also considered taking a "short" position vs. the stock market - but, again, since the evidence wasn't strong enough, I held off to see what might develop. Now I'm glad I did.
Since I follow what's known as Dow Theory to help me understand the big picture - the broad primary trend of the stock, for example - this tells me that I'm OK with some of the equity positions I'm holding. And it tells me that had I jumped at the short position, I would have just lost money. The real question, though, is should I be investing more in stocks?
The short answer: no, not yet. I'm not jumping at that positive signal either.
Now, it's not like the signal wasn't clear. It's more a matter of how I'm looking at the really big picture out there. And one of the things that clouds that big picture is the extent of the federal government's stimulus and its effect on markets. I think that massive spending they initiated starting in 2008 has really skewed markets' behavior. And since there's not really a lot of precedent for intervention of this size, you really have to be slow in drawing definite conclusions.
Disciplined thinking helps here. Staying cool, not making emotional decisions - all that takes experience and self- control. Keeping focus on facts, on evidence, and ignoring your "feelings" - for the most part - is important. So this whole government intervention thing being so huge, it's basically a gigantic fact hanging out there - a little understood fact. It makes me cautious.
Besides, having navigated through the crisis in pretty good shape, I'm really not eager to make a bone-headed move now and lose a significant amount of money - which means I'm still wondering whether we don't see a reversal in the not too distant future.
Bottom line: if you don't need to take risks, don't. Preserving what you have isn't a bad way to proceed these days. At least that's the way I see it.
So now you know why I think the stock market's turning up - and why it's not making me jump in with both feet. Let me know if you find this sort of thing helpful.
I'm bringing this up because I've decided to start incorporating more specific stuff about what's happening out there in this blog - stuff like what's up with different markets. Of course, none of this is meant to be any kind of advice. It's just information I sift through all the time. Some of it helps me make decisions for the accounts I manage.
So from time to time, I'll pass on some of the more specific day-to-day sort of thinking that goes on in my brain. I've avoided doing that in the past, because so many blogs just sort of spit out daily random thoughts or rants, and since I don't have much interest in that sort of stuff, I figure you don't either. So I'll try to keep these "specifics" under control - no rants, unless I'm really pulling my hair out - and nothing too technical or boring. We'll see how it goes.
Anyway, the stock market gave a nice positive signal recently. Basically, the Dow Industrials and the Dow Transports topped their previous June highs - both on the same day.
It's an interesting development, since the stock market really behaved badly recently. Technical indicators of all sorts were saying "Watch out!". But I've learned that you've got to be careful about making major decisions on where to invest you money, especially when the evidence is short-term in nature.
With that in mind, when indications were extremely negative I just became vigilant about the stock positions I held. I also considered taking a "short" position vs. the stock market - but, again, since the evidence wasn't strong enough, I held off to see what might develop. Now I'm glad I did.
Since I follow what's known as Dow Theory to help me understand the big picture - the broad primary trend of the stock, for example - this tells me that I'm OK with some of the equity positions I'm holding. And it tells me that had I jumped at the short position, I would have just lost money. The real question, though, is should I be investing more in stocks?
The short answer: no, not yet. I'm not jumping at that positive signal either.
Now, it's not like the signal wasn't clear. It's more a matter of how I'm looking at the really big picture out there. And one of the things that clouds that big picture is the extent of the federal government's stimulus and its effect on markets. I think that massive spending they initiated starting in 2008 has really skewed markets' behavior. And since there's not really a lot of precedent for intervention of this size, you really have to be slow in drawing definite conclusions.
Disciplined thinking helps here. Staying cool, not making emotional decisions - all that takes experience and self- control. Keeping focus on facts, on evidence, and ignoring your "feelings" - for the most part - is important. So this whole government intervention thing being so huge, it's basically a gigantic fact hanging out there - a little understood fact. It makes me cautious.
Besides, having navigated through the crisis in pretty good shape, I'm really not eager to make a bone-headed move now and lose a significant amount of money - which means I'm still wondering whether we don't see a reversal in the not too distant future.
Bottom line: if you don't need to take risks, don't. Preserving what you have isn't a bad way to proceed these days. At least that's the way I see it.
So now you know why I think the stock market's turning up - and why it's not making me jump in with both feet. Let me know if you find this sort of thing helpful.
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