Toeing in with a dead neutral bias

Over the past couple of weeks I have written that we were getting close to a technical buy on some of the broad equity markets. This week we toed in our first buy tranches on the S&P and the TSX. We still have a lot of cash not yet committed. If the recent up trend of the past week continues, we will be no doubt be adding more capital in the weeks ahead. But if the trend breaks down again, we will have no hesitation to exit.
I can make an argument for why markets could rally here. I can make an argument that they may be likely to break down again in the not too distant future. I have said prices could react similar to 1973-74, when the market fell 40% to October 1973 before rallying 13% from November to February, and then breaking down to a fresh low in the fall of 1974. That produced 2 back to back annual losses of -26% for the US markets during that cyclical downturn of the secular bear that ran from 1966 to 1982.
This recession is going to last longer than most are prepared for. The economic data will undoubtedly be dark for several months to come. The stock market will work away at re-pricing as it goes. At present, I am neither a bull nor a bear. Until the trend stabilizes further, I would caution against making strong bets with capital either long or short.

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9 Responses to Toeing in with a dead neutral bias

  1. Anonymous says:

    Danielle,
    Thanks for posting this information. You have a lot of valuable insight on the market that it not easy to find elsewhere.

  2. Anonymous says:

    i wouldn't be surprise the market to test the october lows. the current run-up is likely a bear trap. take caution.

  3. Anonymous says:

    I do not remember the periodical or the article which I read just 2 months ago, however I do remember the contents. There were 21 days when the broad index moved more than 3% during the last bear market. None during the last bull market! The bear growls.

  4. Anonymous says:

    Danielle
    I look forward to each and every post for some direction.
    If the bottom was indeed Oct. 10, can we safely say that the recession will be over in about six months ( May).
    If you are “towing in”, do you think this is so, or are you simply range trading.
    Where are we in this secular bear market.

  5. Anonymous says:

    Re the secular bear that began in 2000, I think we are about half way through it in 2008. Re our recent preliminary buys on the TSX and SPX, we could get kicked out again shortly if if it continues to break down. But we suspect we may see a rally into the New Year before we get another sell and leg down to the ultimate low later in 2009. D

  6. Anonymous says:

    The Finanial Post stock market challenge (stockstar.ca) has 17,690 particpants as of today. Each is given a fictitious $100,000. to invest anyway they like. Individual shorting of stocks is permitted. Only 16% of participants are in positive territory (the leader is up 790% but that is another story). Each participant is trying to grow their portfolio, but only few can. The the vast majority are losing money. What if…….what if……… one invests with the intention of trying to lose money? Perhaps then there will be an 84% chance of making money?
    Danielle, algae video is interesting. Jimbo

  7. Anonymous says:

    Hi, Danielle
    I read your book “juggling dynamite” about a year and a half ago. The infomation in your book preventing me from putting my money in the stock market. Therefore, thankfully I did not lose money and I have Danielle to thank. I will faithfully continue to read her blogs. There are honest people in the world of finance. Avoid the advice of the so called market pundets like the Jeremy Siegals and the Jim Cramers of the world. I advise all potential investors to read Daniell's book, Benjamin Graham's Intelligent Investor and any book by Peter Bernstein. Once again I would like to thank Danielle for being honest and ethical.

  8. Anonymous says:

    Hello,
    I read this interesting article from the economist – http://www.economist.com/finance/displaystory.cfm?story_id=12564003. They are 'toeing in' in a much more significant approach.

  9. Anonymous says:

    Danielle,
    How I wish I had discovered you back in May!
    The worst thing is that I was following events earnestly, but I felt that Canada would be immune from US problems to a certain extent. I didn't see the US dragging oil down and hence the TSX. And then I felt it was always 'too late now' to get out. I just read your May report at Venable Park and it answered all the doubts I had back then…
    I will be following your comments religiously. Thank you.
    Alex

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