Thursday, 11 April 2013

Hold onto your hats

The DOW broke out of its flat-line yesterday and made a new high. It's already left its historic high behind by over 500 points. It was not the only index that finds itself in new high territory. The S&P 500 also broke through its previous all time high and provided some confidence that we are onto a new roll.

I find it exceptionally difficult to get any feeling about where a market will pause, or even worse stop, when there is no history to give guidance. For the DOW a friend has suggested 14900 as a target. But that's just 100 points from where we are now.

The last two bull runs were over 1000 and 700 respectively. So taking 14600 as the starting point I would not be surprised at a 500 point run. that would take us to 15100. That's only 300 points above where we are now. A strong bull run could manage that in less than a week. Two flies in the ointment though. The market must encounter resistance at 15000. It's such a psychologically important number. Both the 13000 and 14000 held up progress as the market made its way up.

The other fly is time of year. I speak as one who has repeatedly been bitten by the skidding halt the market makes at the end of spring. I don't think the fact that, for us in England, spring has yet to materialize will change the situation. I watch the daffodils manfully coping with freezing nights and making the most of a few sunny days. And when it does not freeze the rain pours down.

Net result: I am torn. Can't afford to be left out but very aware that there is a better than 50% chance of a viscous turnaround  in the next few weeks.

What have I done? I've added a few more stocks to my portfolio: TA TGD and NLS (all on the US market). Another buying spree is on the cards for later today. I might even poke my nose into the UK market which is also on a roll. At 6387 it has a long way to go before it hits its all time high, just 50 points shy of 7000 set in January 2000. So a good 550 points to go. But it also has that diagonal resistance line to contend with at about 6550.

My conclusion: make hay while the sunshine, but keep a tarpaulin close to hand.


Dave said...

I think the old advice, "Sell in May and go away" might apply again this year.
Glad yor flu is better!

paulus said...

Thanks for kind wishes. Sell in May indeed, but does that mean we've got another six weeks?