Investor's (H)Edge: What We Need is a Craziness Index
What We Need is a Craziness Index
by David Brown, Chief Market Strategist, Sabrient Systems
The market advanced steadily this week with the S&P 50 reaching 1313.80 today, which is above both its 30-day and 50-day moving averages and positive on a great majority of technical indicators.
All that, despite yesterday’s report of a very sharp decline in durable goods that was totally unexpected, interest rates that are inching higher, and oil prices that are at a two-week high. All that, despite the imponderables in Japan and Libya, as well as most of the Middle East. All that, despite Wednesday’s vote by Portugal to eschew austerity in favor of a bailout by the European Union, which does nothing but aggravate the global markets.
You may find this as hard to believe as I did, but both the short-term and long-term “fear indicators” – the VIX and VXX -- have dropped seven consecutive days in a row and are almost back to their levels before the global chaos began in late January.
What is this market on, anyway? Xanax? Maybe there should be a craziness index. If there were, it would be off the charts.
While it is true that jobless claims continue to drop and GDP was revised upward, it is difficult to imagine the market equating what few positives we’ve had recently to the economic environment I just described.
Is there a logical reason behind this ‘irrational fearlessness”?
Some say that massive short-covering is fueling the market (but why now?). Others say it is funds flowing into the market via QE2, which is possible but difficult to track down. The fact that interest rates are threatening to rise could be panicking more money out of the bond market into equities than anyone appreciates.
Nobody knows, really. What I do know is that it is a perfect time to be balanced between longs and shorts, as no one knows what’s going to happen, and I’m happy to say that our portfolio has done well during these past two chaotic months.
Portfolio Review
This week we are reviewing long position Alliance Resource Partners, LP (Nasdaq: ARLP) and short position American Tower Corporation (NYSE: AMT) . . . Click here to learn more about the Investor’s (H)Edge portfolio.
Full disclosure: The author does not personally hold any of the stocks mentioned in this week’s Investor's (H)Edge.
Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their own financial circumstances in acting on any stock selection made by Sabrient. Sabrient makes no representations that the techniques used in these reports will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.