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The S&P 500 climbed to its third highest close in history in eager anticipation of Q1 earnings. Making new highs should be a good thing, but why am I still so uneasy?
• Soft Economic Reports: Last week provided a Royal Flush of 5 soft economic reports including services, manufacturing and, most importantly, jobs.
• Every Bull Must Rest: The market is up 10% year to date. Yet earnings growth will only be in the mid-single digits. Yes, stocks can go up by more than earnings growth as long as PE's expand. But there is only so much elasticity in that equation.
• History Repeating Itself: In 2010, 2011 and 2012 the market raged higher up til April earnings season only to get thwarted. And here we are in April 2013 sitting on a fat 10% gain. It is eerily too similar to the recent past.
• Large Caps Leading the Way: That is not a positive sign. Rather it says investors are more interested in safety than risk taking. That is often a harbinger of a bearish turn on the way.
This is my short term view of a consolidation or modest correction in the midst of a long term bull rally. Get ready to buy on forthcoming dips.
Just press a button and PRESTO - out pops the list of stocks from a market-beating strategy. In fact, since 2001, one screen has averaged a yearly gain of +67.4%. Even during 2008, while the market plunged -37.0%, those picks were up +15.3%.
Investors marvel that it's "like a license to print money." "No benchmark stands a chance!" Why wait another day?
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