This time of the year is the most frustrating days for wealth coaches; the markets are just drifting with no conviction in either direction. Fear and complacency are the theme. Worries about Federal Reserve actions, Syria and Obamacare coupled with another debit ceiling are keeping investors frozen. So where we are now overbought or oversold? Just a few short weeks ago we were overbought, but as volume on the indexes began to dry up and we are now becoming oversold. What is interesting is we not only are seeing this in the equity market but possible in the bond market. Housing is slowing due to various excuses and with the latest economic reports the economy may not be as robust as we perceive.
Billions of dollars in bond funds are being liquidated but instead of going into equities they are going into cash. The consensus is that we are due for a correction and the myth of market timing may come true and the individual investor will have a chance to get in at the elusive bottom.
I remember my grandfather telling me, when I was learning to box, “Don’t close your eyes; it is the one you don’t see coming that will knock you out.” That is what market timing does, very few kept their eyes open in March 2009 and took advantage of what may be known as a generational low. Up markets are just as painful if you don’t pay attention. I have never seen a 150% drop but we just had a 150% upside.
With bond money turning into cash this is example of how we are sitting just on the edges of a new super cycle bull market, not to dissimilar in potential to the one that lasted from 1980 until the tech wreck of 2000.