A few of you wrote in the comments section to ask about the stock market.
Here are my thoughts.
After I called a peak at roughly the middle of Oct 2009, the market (Dow Jones Index) fell about 5% after it peaked on 19 Oct. It rebounded from the low in early to rise to another peak earlier this week. I believe this whole rally is driven large by liquidity. On and off we get some economic bad news that get investors worried so they sell off and cause the market to have these small corrections of about 5-6%. We had a number of these since June 2009 and each time the market recovered to reach new highs. In the past postings on the same topic, I said that it can be quite difficult to pick a top unless there is an identifiable final peak. I'm trying to figure it out. The market is starting to look very familiar to what happened in 2003. In the 2003. the market hit a low in March, ran up like it did this year. Along the way, the usual worries about the nascent economic recovery caused a few ripples in the market but no major correction. Like 2009, the market in 2003 was also driven by liquidity following a series of rate cuts that caused the interest rate in the US to be near zero. Like 2009, the 2003 recovery was also a "jobless recovery" so doubts about the economy kept recurring throughout rally. The 2003 rally looks like this:
Our current stock market rally is actually larger than the one in 2003. However, the psychology of the market is very similar so is the duration and the type of 'small' corrections we have seen in the past few months.
If you look at the 2003 chart, there is a big final run up somewhere from mid-Nov to the end of 2003/beginning of 2004. The question in my mind right now is whether we will see a similar run up in this rally that will take us right to the end of the year. I tend to remember things about the economy and stock market very clearly - in mid-Nov 2003, there were nagging doubts and worries about recovery...then all of a sudden, in a matter of days, investors became very optimistic and the market rose - and it did so continuously because the beliefs of investors were reinforced by the rising market and the coming Christmas sales which analysts kept insisting will boost the economy.
The market in 2009 is going through a very similar phase. I think we might see a point in time when doubt is replaced by euphoria resulting in a final run up that will mark the end to this magnificent rally. 2010 might look like 2004 when the economy strugggled to stay out of recession and the stock market went nowhere for a whole year.
In case I'm wrong, I've also put in trading stops to protect my profits from the current rally and if the market becomes directionless, I will sell in small batches. I'll describe in some detail what I did and how I generated those returns when it is all over.
While these are my thoughts on the market and I intend to go along with my plan.....as I'm not a professional, I suggest you guys take what I say with a pinch of salt.