Six,and Being Long, and Market Psychology.
Well, a few weeks ago, it was March 6th. The S&P hit 666, and the dow had gone below 6,666 as well. My odometer on my Silverado hit 36,666; I ususally don’t keep cars that long. My wife and I got into 6 fights in one day. To top it all off, I ordered an egg and cheese on a roll from the local luncheonette and was charged $6.
Six. I hate Six. And I hate round convenient numbers.
Fast forward to today. At yesterday’s close we had risen 25% off of 666. 25% is a nice convenient number. The market closed impressively strong. I have been bearish the last two days and wrong in being so. And I am still bearish. Over 70% of the S&P500 stocks closed above their 50 day moving average. When this number gets close to 80%, I will not be able to contain my despair. I will feel really bearish then.
Markets, especially during extremes, are best predicted by understanding mob psychology. The mobs loved CSCO at 70 (remember that BusinessWeek cover?). The mobs predicted oil at $200, when it hit $147. The mobs predicted oil at $25 when it fell through $40. I would not bet with the mob during extremes, but rather I would stay cautiously away from what they are doing. Keep cool all. I think the S&P could go to 850 still in the next week, but it can do so without me.