As I have said before – for the most part, portfolio managers are all the same as they all fear something. They fear the markets are about to collapse and yet they fear not to be invested. That is because they fear the markets may advance without them on board. In order to defend against a falling market they all own some gold and they all over-diversify. I recall Warren Buffett saying that “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”
So here we are, into a rally following a nasty correction and the question is do we move on to new highs or do we bail because the worst is yet to come. We all know what the portfolio managers are doing. They all own some bonds, some gold and perhaps an inverse product. Their objective is to have equity exposure – but not too much, and so if the market declines they won’t decline as much. The inverse is also true, if the market advances they won’t advance as much.
Which way do you think the equity markets are heading? Our chart is the weekly bars of the Phix SOX Semiconductor Index plotted above the S&P500. The studies are the 40-week MA, the Coppock Curve and the lower study of relative analysis MA. So what do you think about the outlook for the equity markets – and why?
Tags: Buy, Sell and Know When to Buy