Seasonal Selling or A Top In the Stock Market

If you follow most of the commentary right now about the stock market you will see that a common theme is whether you should "SELL IN MAY".  This is a common seasonal trend in the stock market when trading in stocks becomes thin as more traders head off for vacation.  I guess this is somewhat true as I have to head to London here shortly, but its not exactly for vacation. But soon after that I'll find myself in Las Vegas for a little R&R, so I guess this trader will be off eventually for a few days.  There are a few people that are speaking a little louder and signaling that it may be more than seasonal.  I tend to listen to these voices if I find some of the points that they are highlighting credible.  I also tend to tune into these point of views more as friends and family begin to want to talk "shop" with me.  If my friends are asking me about the stock market and telling me how well its been moving and that they have to get back in because they've missed the move up, I start to think.."Uh-Oh the trend may be the markets will start moving down".  When the average Joe is jumping in its usually to late, the smart money has already pounced.  So I am a pretty average guy, so how does this effect me!  Well when I start to get scared about the markets, I try to do the opposite of my impulse and buy.  When things are getting really rosy, I try to sell even though I don't want to.  When I started getting more people talking shop, I sold a few positions, but to be fair, I added a few more of my PREMIUM ALERT picks. The one caveat is I am adding picks that might survive a tough downturn.

Here is a snippet from a BLOOMBERG article of an investor who's painting a picture that's less rosy. Attached is the link to the full article: 

John Burbank, founder of $3.8 billion hedge fund Passport Capital LLC, said he expects a U.S. economic recession this year or in early 2013, according to a letter to investors.

Uneasy Markets...Is There Reason to Worry?

Sometimes when I haven't written a post in awhile its because I am paying very close attention to what's going on in the US markets as well the rest of the world. My general thoughts are people are 'cautiously optimistic' but still a little schizophrenic.  They haven't forgot about how bad a few years ago felt for them and the people they care about. My main street barometer considers things like: 1) Are people shopping? 2) Do I see the bars/clubs/restaurants crowded? 3) Are people talking about their bills or their vacation?

My unscientific survey of my friends and I show that we are going out to more movies, drinking more beer, and thinking about that next trip to Mexico or Las Vegas.  This is positive because it means that unconsciously we might feel that things aren't too bad out there.  However, our alter egos remind us to constantly talk about deals! Our conversations usually start with, "Where can we get in for free?" or "Are there deals or specials today?"  This translates into into my views on the stock market.  I feel pretty good about things and wanna buy more stocks but I want a deal! I think we all share the same feelings of wanting to be invested because we see the stock market going up but I caution you to "WAIT FOR YOUR DEAL!"

I was reading and wanted to share some a question and answer from a Wall Street pro that summed up my feeling on stocks and why I am cautious. Here is a snippet that was posted by the Wall Street Journal:

WSJ Link

Q: Where do you worry you might be wrong?

A: Well, our biggest concern is not so much about being wrong over the next five to 10 years, it's being wrong next year. We believe very strongly in value. We think that value wins in the long run. The problem is it can lose for an inconvenient amount of time along the way. And I would say our biggest concern about why the U.S. might win this year is because of what's going on with government policies around the world.

We believe that the U.S. stock market is overvalued because profits are unsustainably high. But the biggest reason why profits are unsustainably high is because we're running giant budget deficits, which has allowed corporations to cut their labor costs without forcing the workers to cut their consumption.