Making Money Alert
Don't Get Kicked by the Bull
01/04/2012
Tuesday was the inaugural day of 2012 trading, and we witnessed a whole lot of bullish action. In fact, I think that the New Year’s Eve party that began last Saturday night in Times Square may have spilled over onto Wall Street on Tuesday. Markets were up big across the board, not only here in the United States, but also in Europe and Asia.
The surge in stocks put the S&P 500 Index back above its 200-day moving average and, as I write this article, the broad measure of the domestic equity market sits just over the 1,275 mark.
Despite this latest kick higher by the bulls, I think we likely are witnessing another bullish head fake that is similar to the kind we saw in October, November and again in early December.
As you likely know, I’ve been saying that stocks could undergo a relief rally of up to 5%, as many hedge fund and money managers try to position their portfolios for growth at the beginning of the year. This early-year exuberance is understandable but, unfortunately for the bulls, I believe it’s imminently unsustainable.
Certainly, we could see stocks move even higher from here. However, I think the prevailing dual headwinds of Europe’s debt crisis and China’s economic cool down will continue dragging stocks lower for some time to come.
I currently am advising readers of my Successful Investing advisory service to remain cautious with respect to their allocations to this market. I think there is just way too much potential peril here, and that means diving in head first in this shallow market water could result in serious injury to your wealth.
Now, if we do see stocks mount a significant rally from here, and if that rally proves it has legs, then you’ll want to begin adding equity exposure. Until then, however, the prudent investor should sit tight with a big wad of cash.