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TAM's Morning Cup of Jo: December 12, 2011

|Includes: SPDR S&P 500 Trust ETF (SPY)


“For the experienced to survive, reality must be considered.”
– Charles B. Richardson

Happy Monday Morning Stakeholders. 12/12, only 2 more weeks until the beginning of a new year.   Just typing those words make me question where 2011 has even gone. For many it’s been a year we’d rather forget; in terms of the market anyhow. Interestingly enough, Friday’s close put the SPX right at 1,255 – two measly points below the 2011 open of 1,257. Now if that’s not fallacy of portrayal I don’t know what is. 
 
After last week’s EU meeting investors were left with continued ambiguity, but still managed to push out a 1.7% day to close the week. Rather typical in the sense of volatility during the latter half of this year, wouldn’t you agree? But now what; Santa or just more Headlines? The answer is anyone’s guess at this juncture and the very reason why investors should play this market ‘close to vest.’ 
 
In fear of sounding like a broken record, the market remains to be trading below the new Cyclical Bear Market Trendline and deserves caution (for both sides – Bulls & Bears). If by chance the market does happen to break above said trend (~ at the 200-DMA), then a shift in stance would only be prudent. In our opinion, if this occurs it does not mean the market regains a bullish stance. More so, it indicates a reversion to ambiguity and lack of longer-term clarity. 
 
Technically speaking, a close above puts the market back into the “2011 Channel of Indecision” (Jan 2011 to Aug 2011). Simply, for our portfolios, it means a shift from a 30/70 Long/Short stance back to a market neutral 50/50 stance. When, and only when, an unencumbered technical pattern indicates a potential move beyond said channel, would we become bullish. 
 
With the volatility derived from headlines, consuming the trading activity and market whipsaws, one must look beyond and understand the psychology which lies beneath.    This, again in our humble opinion, is being driven by the fear of missing out; not rationally investing.
 
Keep your wits about you as we enter the Holidays. 
 
We hope this helped!
 
TAM-KAT