Tip-Toeing to the Edge...

Mike Turner |

This week, my data tells me to increase my long exposure. But, the Turner Oscillator is screaming that a correction is likely to occur soon. And, it is very hard to ignore all the following (which the market has done for nearly two months, now):

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  • Unemployment, according to the CBO is over 10%... Let's ignore that... Check!
  • Europe is no closer to resolving their sovereign default issues today than they were six months ago... Let's ignore that... Check!
  • Our government continues to spend money like a drunken sailor (the analogy gives a bad name to drunken sailors) which puts us on the Greecification path and we are no closer to resolving our debt issue today than we were six months ago... Let's ignore that... Check!
  • 3 million workers have given up looking for a job, so the government statistics conveniently leaves those people out of the unemployment numbers... Let's ignore that... Check!
  • The housing industry is STILL looking for a bottom and it is a foregone conclusion that no economic recovery of significance can occur without a turn-around in housing... Let's ignore that... Check!
  • The Federal Reserve has always misread the economy and has always provided unrealistically low interest rates far longer than they should and now they say they are going to keep "accommodative easing" in place through 2014, which 'should' signify that they believe the economy will be in bad shape for at least two more years... Let's ignore that... Check!
  • Iran is building long-range missiles capable of reaching the US and is months (if not days) away from having a weaponized nuclear bomb... Let's ignore that... Check!
  • Israel, it is rumored, could be looking to execute a preemptive strike on Iran to take out their nuclear bomb operations. An Israeli attack on Iran would very likely roil the market... Let's ignore that... Check!
  • Iran is threatening to close the Straits of Hormuz which could plunge that part of the world into war, skyrocket the price of oil and push many country's (maybe ours?) over the edge economically... Let's ignore that... Check!
  • The market has moved higher for six straight weeks without pausing for breath, so assume this will continue for the foreseeable future... Let's blindly accept that the bull-market will never end... Check!

Now... let's flip the coin (a little Super Bowl lingo for today...) and look at the other side, because there are some seriously exciting bright spots that might prove to be reliable bellwethers...

  1. We should not ignore the blow-out quarter for Apple (AAPL)--what a great company). When Apple is strong, one would think the economy is likely strengthening.
  2. Caterpillar (CAT) had an incredible quarter and an even greater forecast. It is hard to believe the global economy is headed for recession when the foundational elements of the large construction industry appear to be buying big equipment.
  3. There is no ignoring that the preponderance of quarterly reports, so far, have been more positive than negative. This bodes well for our economy.
  4. This is a Presidential election year and all negative issues will be downplayed by the press and every opportunity to throw money at everything and anything that will keep incumbents in power will be done. This is great for the economy (in the near-term) and as a result, the stock market.

2012, in spite of the Mayan Calendar prophecies, could be a breakout year for the market. But, this I know about the stock market... It will not go up in a straight line forever. My short holdings have suffered in January and there is great pressure on me to jettison those holdings. It is hard to play the short side when it has been hammered for 6 straight weeks with a wild bull market.

I still believe a correction is likely, but it may be a month away... or it could be next week.

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