I'm buying stocks

After being bearish on the market for a while and being short AUD/JPY, oil, and a few general stocks I am finally turning bullish on the markets. All of the usual technical and sentiment indicators point to the markets bottoming and at the very least getting a nice bounce. I look at a composite of indicators including the cboe put/call, percent of stocks above their 50 day moving average, 52 new highs/lows, nyse percent bullish, nasdaq sentiment index, the vix (anything above 35), nyse advancers/decliners, and a sentiment index from sentimentrader.com. All of these indicators show that the market has either bottomed or is very close. So I am now long ATPG, LMNR, HOG, WYN, APL, MO, and looking to purchase some oil and maybe long AUD/JPY.

I will either look like a genius or a fool. The only way I am wrong is if this European crisis worsens dramatically or their is a crash in the Chinese economy. I happen to think the probabilities are low so I am willing to take the risk. The ECB is printing money so that should provide some sort of stop gap measure to the debt crisis in Greece, Portugal, and Spain.

I have noticed that sentiment within the markets has fallen off a cliff from euphoria 4 weeks ago to manic depression. Every one I know is bearish expecting the markets to fall 30-40% more. They say a crash is imminent and now (after a 12% decline) is the time to sell. Folks you do not make money buying at 1220 on the S&P and selling at 1080. But that seems to be the general consensus. I even saw a poll on CNBC where 40% of their viewers believed the DOW was headed to 5000. I would expect this to be the ultimate contrarian indicator because usually these fools are bullish. The Fast money crew is also bearish telling people to be cautious blah blah blah. I remember they were telling people to buy commodity stocks at S&P 1220 and go long oil at 80 because it was going to 90. Talk about leading the sheep to the slaughter.

I have a hard time believing that the market is going to crash or fall dramatically if that is the general consensus of all market participants. This is a paranoid schizophrenic market that has serious emotional problems. The only way to make money in this market is to buy market depression and sell market euphoria.

Good luck

Black Swan Insights


No comments:

Post a Comment