Posted |
Everybody's Talking About A Pause image

Good Morning. Here we go again. After three consecutive red closes, the masses are now absolutely, positively sure of what is going to happen next. If I heard it once yesterday, I heard it ten times: it is time for the market to pause.

Never mind the fact that the now deafening chorus projecting a time-out in the market is occurring after stocks have basically gone nowhere for three-plus weeks. Yep, that's right; the S&P 500 closed Wednesday at essentially the same place it was in the middle of July. So, it is probably safe to say the hindsight glasses have been donned and are fully operational at this time.

But what is really interesting here is that the pundits, the "experts," and the television commentators appear to be convinced that that which has just happened on Wall Street will continue to happen on Wall Street going forward. While the reasons given for the anticipated pause include all the "taper talk" as well as worry over the "budget battle," the German election, and growth issues in China (none of which are new, by the way), the market prognostications are the same - there is nowhere to go but sideways or well, okay, down.

Speaking of down, after three straight declines (during which the S&P 500 has fallen -1.1%) the talk is all about how far the market will fall from here. Will it be 2%? Can stocks decline 3.5%? Or will the S&P take a second 5% tumble in the last three months?

My first point on this fine Thursday morning is that Ms. Market's game is rarely, if ever easy. And my 30+ years of experience in the business has taught me that the indices don't tend to follow the consensus of what is expected too terribly often. No, the stock market has a tendency to go out of its way to frustrate the majority of the players, the majority of the time.

As I've opined a time or twenty, this is why I don't bother participating in the prediction game. Honestly, what's the point? No one has been able to consistently "call" what the market will do next for any length of time - ever (and ever is a very long time!). So, I figure it might be a teensy bit presumptuous to assume that I'm going to be the first one to start doing so.

Another of my favorite market clichés is "the best trade is often the toughest trade." So I ask you, what would be the toughest thing to do with your trading account right now? Take some profits? Buy some "premium" (via VXX, VXZ, etc.)? Write some calls? Hedge your longs? Or put on some shorts? Frankly, all of these are pretty popular ideas right now.

Or here's a trade idea for you. What about putting on a long position - maybe even a leveraged long position? Now we're talking tough trades, right? Admit it; how many of you cringed at the idea of buying some SPDRs (NYSE: SPY) right about now? In fact, I'm not sure I have heard anyone, anywhere talk about adding to longs this week. No, they are all talking about the pause that will inevitably occur going forward.

Please don't misunderstand. I am most definitely NOT suggesting that investors of any size, shape or color run out and buy stocks today. Heck, even my market environment model says that things are a bit iffy right now and my short-term trend following system may even force me to take a time-out on the sidelines for a while. However, when everyone, everywhere proceeds to tell me, in no uncertain terms, that stocks must do this or that, I tend to get a bit skeptical. As I said above, this game is rarely easy. So, when everybody expects the same thing, well...

Turning to this morning... Trade data out of China seems to be trumping the report that the ECB cut its growth (and inflation) forecasts for the region. Although China's trade balance came in well below expectations, the fact that imports rose more than expected has created some hope for the European markets. Thus, after three consecutive down days, it appears that a rebound try is on tap in the early going as both Europe's major bourses and U.S. futures are higher at this time.

Positions in stocks mentioned: none


The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editor and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. One should always consult an investment professional before making any investment.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

The information contained in this report is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.