Thursday, April 9, 2009

Is The Market Turning?

There are only a few market commentators I enjoy reading and even fewer who I actually pay attention to when they make recommendations.  One of those people is Jim Jubak over at MSN Money.  Today, he wrote an article asking if the market was indeed turning.  After a run like today, with the market up over 3%, it would seem crazy to suggest otherwise.

But like me, Jim thinks that the recent runup is just a mirage.  His logic is sound, probably because it is the same as mine :)  Healthy markets do not behave like this.  You are not supposed to get 25% runs in the market in only three weeks.  The problem, as Jim points out, is that everyone is trying to find the bottom.

The economic news coming out is bad.  And if you believe, like I do, that we are going to have a long painful recovery, one where economic activity is depressed for a long period of time, then you want to be sure to find the bottom of the market.  Like the end of the 70's, we might see a stock market that stays sideways for four, five, or even six years.  This is a frightening prospect for many people so they want to be sure to take their gains while they can.

Given how easy it is to play momentum now as opposed to previous bear markets than runs are going to be exaggerated.  Everyday investors have access to things like ETF's, short ETF's, double short ETF's, etc.  These all allow an investor like me to make big bets in the direction of the market.  As a clear example, I own many shares of UYG.  The stock has more than doubled in just a few weeks.  Those are some crazy moves.

So sit back, and do not rush into the market.  The market has gotten way ahead of itself.  I decided this afternoon to go short the market (By using a double short ETF).  The market went up from there, meaning this position lost some money, but I feel completely comfortable with what I did.


  1. There's definitely activity but are we on the road to recovery? No, I say we're still in the phase of trying to figure out what to do. Maybe in 5 years we'll be back on track.

  2. Five years seems long to me, but the scarier thing is that I agree, it is within the realm of possibility.