An Audible
We were all set to finish our series on stocks being cheap today. Instead we're going to call an audible. Irregardless of our longer term thinking we have become a little more defensive as this week has progressed. Market chatter has turned a bit negative in the past week. Apple's news regarding Steve Jobs and a "sell on the news" response to earnings season has also kept us a little busy. Remember that we are short term Net Market Negative on stocks, having been so since mid-December. You can go as always here for a definition of this term.
Now let's stress a few things.
1. My thinking here does nothing at this moment to change the point I've been making through-out our current series on stocks. That point states that the evidence as we currently understand it indicates equities are cheap and the potential exists for a 6-10% rise from current levels to a target price level of 1350-1400 on the S&P 500 by year's end. This more defensive posture only reflects our thinking regarding our shortest time frame, reflecting two key indicators which are that stocks are very overbought and sentiment has turned short term negative. We started our latest series back on December 3rd of 2010. The S&P 500 has rallied almost 5% since then. That's an awful lot of gain in a relatively short period of time.
2. Recall that our definition of Net Market Negative simply means that we in the main have recently been net sellers of certain equity assets. This means that on balance we have sold more than we have bought. We have been, or are in the process of raising certain cash levels given client risk/reward and strategy mandates. In many cases this raises these cash positions only slightly. We have had very little cash for most of the Autumn in many accounts and prudence dictates a bit of pruning at this point. It is very possible that this move is just a head fake and that stocks could turn on a dime in the next couple of days {just as they have for most of the fall} and head higher. If that is the case we have plenty of exposure to participate in an upwards move. If not and markets move lower than we have a bit more cash to cushion that move lower and cash to redeploy when the market gets in a more positive frame of mind.
3. Since this is nothing more than a short term read of the markets. It is possible that we could redeploy these assets sooner than later if the market gives us the opportunity by pulling back more than a few percentage points in a shorter period of time.
4. This is part of the process of money flow analysis. In situations such as this the playbook calls for a defensive adjustment to this year's game plan. We have or are in the process of adjusting portfolios accordingly and stand ready to make other changes if the market dictates we do so.
*Long ETFs related to the S&P 500 in client accounts.
**Please note that the above reflects solely the opinions of Lumen Capital Management, LLC. As such it is designed solely for the clients and friends of our firm. Since we do not know the investment parameters of casual readers of this blog, they are advised to consult their own investment advisors or do their own homework. Nothing in this posting should be construed as a recommendation or a guarantee of any sort. Better yet, hire us and we'll show you how our work is done!!!
2. Recall that our definition of Net Market Negative simply means that we in the main have recently been net sellers of certain equity assets. This means that on balance we have sold more than we have bought. We have been, or are in the process of raising certain cash levels given client risk/reward and strategy mandates. In many cases this raises these cash positions only slightly. We have had very little cash for most of the Autumn in many accounts and prudence dictates a bit of pruning at this point. It is very possible that this move is just a head fake and that stocks could turn on a dime in the next couple of days {just as they have for most of the fall} and head higher. If that is the case we have plenty of exposure to participate in an upwards move. If not and markets move lower than we have a bit more cash to cushion that move lower and cash to redeploy when the market gets in a more positive frame of mind.
3. Since this is nothing more than a short term read of the markets. It is possible that we could redeploy these assets sooner than later if the market gives us the opportunity by pulling back more than a few percentage points in a shorter period of time.
4. This is part of the process of money flow analysis. In situations such as this the playbook calls for a defensive adjustment to this year's game plan. We have or are in the process of adjusting portfolios accordingly and stand ready to make other changes if the market dictates we do so.
*Long ETFs related to the S&P 500 in client accounts.
**Please note that the above reflects solely the opinions of Lumen Capital Management, LLC. As such it is designed solely for the clients and friends of our firm. Since we do not know the investment parameters of casual readers of this blog, they are advised to consult their own investment advisors or do their own homework. Nothing in this posting should be construed as a recommendation or a guarantee of any sort. Better yet, hire us and we'll show you how our work is done!!!
posted by CR English at 6:16 AM
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