In late January, I’d written a piece detailing why, while still optimistic about the intermediate to long-term prospects for stocks, I was raising cash levels in my conservative growth model to 20%. The broader markets have been buoyant since then overall, but momentum stocks have gotten increasingly carried away to the upside.
Also worth noting: Money seems to be coming out of emerging markets as their central governments raise rates to fight inflation (“You’re welcome” – The Bernank). We’ve also seen what Merrill Lynch strategists are calling “The Great Rotation”, essentially a catch-up trade whereby large caps that have been left at the dock are starting to move and groove.
Anyway, in the past 24 hours, I’ve picked up on three more signals that make me feel increasingly comfortable in my more cautious market posture…
Whitney Tilson capitulates, the noted short-seller is done tilting at Netflix Windmills for now after a 5 month bludgeoning. (Market Folly)
The Egyptian Head Fake, what looked like a dissipating demonstration has turned in a Mad Max scenario including molotov cocktails, gunfire, and some son of a bitch who thinks it’s OK to beat up National Treasure Anderson Cooper. It’s not OK! (MarketWatch)
Possible divergence in the Dow Transports, as documented by a few of my most trusted technician-bloggers. (Abnormal Returns)