Marketview: Recognize the Good Times

• Posted by DynamicHedge
• on January 26th, 2013

A former colleague of mine was fond of saying, “The real money is in the move after the move.” Meaning that, in a serious trend, the bulk of your profits come long after expectations are satisfied and the trend appears obscene. The process of taking profits too soon in some instances or not soon enough can be maddening — especially after a period of choppy markets.  Is too soon or not soon enough quantifiable?  No — it’s a part of the art.  Focus on the fact that the market and the behaviours that drive it are not normally distributed.

We are in the later stages of an epic bull run, and this is where everything gets interesting. There is a feeling that market participant psychology is changing and the feedback loop may start working in favor of higher prices.  This is normal bull market activity.  If 1500 on the $SPX is accepted, odds are a run will be made at all-time highs.  Try not to fight it too hard, but don’t let your guard down.

This week was fairly quiet on the economic front, but the big standout was the continued improvement in jobless claims. Lack of existing homes for sale are causing existing home prices to appreciate, and home builders appear to be having a tough time delivering enough product to meet demand (how odd does that feel to write). By now, we all can appreciate that the wealth effect from most people’s largest asset is what makes them go out and spend. Higher home prices are very good for the economy.  The debt ceiling also appears to be a non-issue as the republicans realize the diminishing returns of using America’s economic health as a political weapon.

Top performing sectors were consumer discretionary, healthcare, and industrials/financials (tie). Money moved out of basic materials, utilities and technology (mostly due to the $AAPL exodus).

Next week is heavy on the economic reports with Q4 GDP, FOMC Meeting Announcement, and the Jobs Report dominating.

All of our indicators are still pointing to bullish activity.  I’m still very wary of a pullback but all indications as of this writing appear healthy.

Winners: $GOOG, $EBAY, $AMZN, $IBM, $NKE, $SBUX, $HD, $LOW

Losers: $AAPL, $QCOM, $INTC, $HPQ, $TXN, $LMT, $CAT, $FCX

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