October's almost here: Is the market headed up or down?

Posted Sep 20th 2009 4:10PM by Connie Madon
Filed under: Forecasts, Indices, Market Matters, S and P 500, DJIA, Housing

It's almost October and the pundits are at again, predicting that the market should sell off again. Let's look at their reasoning.

We have an ongoing deterioration in consumer debt.
Joseph Stiglitz, Nobel Laureate, says that "the U.S. banking sector is now in worse shape than before the collapse of Lehman Brothers.
Bank profitability is expected to come under pressure.
The U.S. housing outlook is grim.

Unemployment is expected to reach 10%.
The dollar is falling to new yearly lows.
Stock valuations are becoming less attractive.
People are saving more and spending less.
Ownership of U.S. Treasury bonds (a run to safety) increased 4.9% to $605.9 billion in the second quarter.

All of these statements are true. So now you look at these facts and you decide to sell the market short. Yet, if you look at the charts the market is in the strongest bull move since the 1930s. Interest rates are historically low. Several stimulus programs are in place.

So what happens? You have the reverse of a down market. The market rallies a few points each day, like Chinese water torture. The shorts are being squeezed a little bit day after day.

Anyone who tries to guess the top of this move is just shooting darts. The market is going up. The market will tell you when it starts going down. Then you can take a look at the short side.