Here's a big point... HOPE vs FEAR as shown by Municipal Bond Prices (using the Dreyfus Muni Bond Fund ETF LEO)
Hope is the time when people are selling their "SUPER SAFE MUNI BONDS" to invest in stocks.
Fear is when people are buying SuperSafe Muni Bonds
It's a general-view, but worth attention.
If LEO turns down, then look for the market to turn up for another leg-higher.
How to put this chart combination to work specifically is difficult, but you can at least see the waves of HOPE and FEAR (for growth in the economy).
The talk of tax cuts got the hope UP and then the realities of how difficult it is to make a change to the tax law put a halt to that hope.
Normally, I am watching the SKEW index and VIX to determine the general mood and it is showing good reason to be cautious here.
However, the amount of fear as shown by the price of LEO moving up is giving me the idea we still have more upside in equities.
Call me a nervous bull. There are major rotations going on in sectors here with highly overbought and overowned internet-tech stocks at lofty heights of valuation and lowly valued, cheap stocks to own too.
What category do you put yourself in? And if you answer, what % of your portfolio is invested in equities?
Tim
9:49AM EST July 6, 2017
Commento
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The market rallied during "FEAR"
Commenti
A-shot
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I must say, been cautious these months. Right now (july) it seems to me that a short term turn is in place, and i have a minimum amount in equities. Yet still, forex is also riding up and down, let alone GDX is also not quite a safe heaven. I feel many are waiting for the black swan, so i guess the market will be irrational to that longer than they can wait. Im out until september though, we did not get any shakeup since may, and i assume one to happen.
timwest
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@2use, The market isn't being irrational at all. It is the Central Banks that are being irrational and Gov'ts that are also being irrational. In my opinion, the market is rational almost 99% of the time (maybe 99.99%). The major market moves have all been rational from my perspective. When do you think the market has been the most irrational? (Thanks for making such a great statement, because it brings up a great discussion!)
A-shot
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@timwest, Indeed. You can label one of the sides irrational, the other one the opposite. I put the word irrational maybe in the perspective of the rationale of the average investor. I would probably better use "doing the opposite" or maybe "not going their way". 90% still lose money in this "game", majority still can't beat indices. I indeed follow the motos that the market has no memory, and it is always right - cause it never has an opinion, only i do. its like arguing to a tree - its a living organism, and will grow as it will. Unless one understands the mechanics and principles of how to grow it, the weather and environmental conditions, you may not be able to understand it (maybe use something else than a tree, but the point is it is its own living organism that investors need to learn how to coexist). So when people are awaiting a bear move, being short and not willing to label a bull market at all - it will surely become a bull ;D
sushil6002
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so as per your view on overall market....where it can go
n how can we keep ourselves apart from this market trap
timwest
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@sushil6002, Have you seen my forecast for the entire year 2017 from back in January? I think we go higher still and then face trouble in the last months of the year.
PKA
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100% equities since before the election.
timwest
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Glad to hear that! I think you are in the 1% of people that have been "fully invested in equities." Can you list the last time you were the most negative on the market and what % invested you were then? Thanks!
PKA
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@timwest, Yes. I was bullish on the first drop to 180's SPY but liquidated on the rally. I was bearish April 2016, looking for a deeper correction 165-176 on SPY. Went full cash. However, Brexit and election I was bullish and re accumulated 100% back to equities. Avg core in 401k is around 193 SPY avg.
PKA
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@timwest, Secondly I'm 85% SPY and 15% in Vanguard Pacific stocks (Samsung, Toyota, Honda, etc.) for allocation.