Troubles in Europe remain as France’s cost of borrowing continues to rise. The European contagion will not stop until every country in the European Union is pressed. France’s CDS continues remain at highs signaling higher borrowing costs. Over on this side of the pond Washington DC still can’t work together towards a deal and confidence a meaningful deficit plan. Facts remain, the market is weak and continues to remain weak until this trend changes any meaningful rally is a ways off. We remain in a downtrend and the market will need to get to work to support a sustainable turnaround.
Again, we aren’t in the predicting business so it is anyone’s guess as to where this market is heading. There are plenty of “good” arguments to be made from stocks are cheap to corporate earnings continue to blow out estimates. Predictions are worthless and are often wrong. We just want to find a trend and ride until it ends. At the moment, the trend is down and we are trading as such. To go against the trend is like trying to swim up the Mississippi.
If you are swing on the long side cash remains king in this type of environment. Unfortunately, this bull market from 2009 is likely over given the recent action in GOOG, AMZN, PCLN, NFLX, GMCR, CMG and others. The shot across the bow was in August and eventually into the October lows when the S&P 500 went into bear market territory. Now, after the recent rally from those October lows was done on very light volume we are dealing with the aftermath of the run up. Fact remains, the trend is down and we are looking for lower prices. If we are wrong, then we are and will adjust our positions accordingly.
Breaking News as this commentary was written the Super Committee announced there was no deal being put in place. Automatic cuts will now begin next year. Unfortunately, the growth of our debt will continue to climb and that remains a big overhang for this country. The finger pointing will begin with Obama blaming the GOP and the GOP blaming the Dems. It is all unnecessary banter. If they cared about this country we’d have a deal in place securing our future and our dollar. This is precisely why we stay with the trend and ignore the nonesense spewed from media outlets.
Always cut your losses!