Thursday, April 26, 2007
"Wake up Carson," I whispered into my sleeping five-year-old son's ear this past Sunday morning. "It's time to get ready for church."
Carson's eyes shot wide open. He bolted upright in bed and smiled like he'd just discovered a 15-pound bag of Skittles.
"We're going to church today?" he asked. "Is tomorrow Christmas?"
Of course, it wasn't Christmas. It was my goddaughter's first communion. But my son's questions, besides filling me with the guilt of a nonpracticing Catholic, reminded me of the concept of seasonality.
Just as summer always follows spring – and in the Clark family, Christmas always follows our annual trip to the parish – seasonal factors influence the action in the stock market.
We all know that December through February is a good time for the stock market. September through October is typically bad. We almost always get a decent summer rally. And the market usually takes a pretty good pounding around May.
A quick check of the calendar tells us that today is April 26– so it's just about time for the drubbing to get started.
I write these comments rather reluctantly, though. It's hard to be outright bearish on the stock market when the semiconductor index is on the verge of breaking out of a six-year-long trading range. Strength in the technology sector is almost always a good thing for the broad market.
But, like a teetotaler at a cocktail party, it's hard to watch all the silliness and not think that something bad is about to happen.
The Dow is up 1,000 points in the last six weeks. It's been an unrelenting march up – particularly the most recent stretch – with 14 of the past 16 trading days closing higher. Most curious is that this spectacular run is occurring while oil and gasoline prices are also racing higher. And interest rates are rising as well.
I'm not willing to bet too heavily on the downside just yet. Like I said, it's hard to be bearish. But it's easy – and probably quite wise – to be cautious.
There's nothing wrong with taking a few chips off the table every once in a while. Yes, you may cash in your speculations a little early and miss out on the highest possible profit. But that beats the heck out of having all your chips exposed when the shooter finally rolls a seven. And, eventually, the shooter ALWAYS rolls a seven.
It wasn't all that long ago that the Dow was racking up a string of consecutive new highs. Momentum traders were spraying chips all over the table and cheering "let it ride" as the shooter was on a roll and the money was easy.
But then the Dow hit an air pocket, and all of the easy money was wiped out in one bad day back in February.
I had a cautious feeling about the market shortly before that happened, and I shared it with you a week before the plunge. I'm getting that same feeling again.
Of course, it could just be that ol' nonpracticing Catholic guilt.
Best regards and good trading,
Shipping continues run: Eagle Bulk, Arlington Tankers, DryShips, International Shipholding, Teekay, Tsakos Energy Navigation, and Quintana Maritime.
Steel companies... AK, Chaparral, Gerdau AmeriSteel, Siderurgica Nacional, Posco, and Worthington reach 52-week highs.Big Pharma stocks at new highs: Bayer, Altana, Merck, and Schering Plough.