Five Reasons to Sell

Includes: DE, GLD, SLW, TNH
by: Robert A. Graf

You may recall I was bullish during the last several weeks when I wrote my article on Nov. 9th in Seeking Alpha entitled “3 Reasons Not to Sell (Just Yet)” and later its sequel “3 Reasons Not to Sell (Just Yet) – the Ireland Version”.

Since then, my stock recommendations (1) have had a fine run--for Silver Wheaton (NYSE:SLW) over 5%, Deere (NYSE:DE) got a nice upgrade and also climbed higher, the Gold ETF (NYSEARCA:GLD) continued much higher despite all the noise about how it was going to collapse. AAPL has continued to hold on with little or no new news lately.

(2) The VIX is now lower than its last recent low. This appears to me to be a good juncture to buy some puts on stocks that may climb higher, such as SilverWheaton. But it also is a good time, in my opinion, to sell out of the stocks with the good moves such as DE and Terra Nitrogen (NYSE:TNH) in the agricultural sector that has dropped in its sector group for now.

(3) The pundits are just too loud lately shrieking and screaming about a next leg up. Not just that it is coming, but rather that there is no way that anything else could possibly occur—good time to get out. I could miss the next leg for a while, but it won’t decrease my gain any. In fact, I’ve gained a good track record in missing the last few spurts before the thing turns around and go the other way.

(4) The Russell 2000 is up nearly 70 points in the last 30 days. Looking back historically at Russell 2000 gains and normalizing the values yields about 70 points in a month (trough or crest), so this seems to me to indicate we’re about at the inflection point again.

(5) The good news isn’t translating into major moves up either. We now know roughly what the tax policy is likely to look like. I doubt we are really in a holding pattern waiting for that to come out anymore. Wall Street movers tend to bet a little bit farther ahead than that (baked-in). In fact, major bullish sentiment from the likes of the top brass at Goldman Sachs have been unsuccessful in pushing the needle up--even with a prediction of 1450 on the S&P500 by the end of 2011.

In summary, this article could be a bit early, but in true contrarian style, I’m pulling in now and letting the not-so-interesting headlines carrying far less stress than weeks ago play out to boredom and start giving rise to some market declines. Despite the further boost of extra stimulus, it is being received by overplayed talk of bond money forced into the stock market and the increasing price of oil already showing up at the pump cutting away at some of any economic boost from extended unemployment benefits. It might just be time for the bull to go into the barn for a while.

Disclosure: I am long SLW, WBC, AAPL, CNI, GLD. Sold DE and TNH.