I have seen several articles indicating this market is very overbought and might be due for a correction soon. The “wall of worry” seems to be getting steeper day by day. Most of the big traders in this market have left or are leaving for the holiday so we shouldn’t see any major changes in the markets until at least Tuesday unless there is some type of world event or announcement.

Here is an example of the cautious articles I have seen lately:

IS HIGH BETA ABOUT TO CRASH THE MARKET?
by The Pragmatic Capitalist

As stocks have become increasingly invulnerable over the last few weeks high beta assets have gone thru the roof. The discrepancy between small caps and large caps has been particularly noticeable. Since the February 8thFebruary 8th bottom, large caps have rallied 12.5% while small caps have rallied 18%. The divergence in performance has resulted in an unusual and potentially bearish scenario. The ratio of large cap to small cap performance has plummeted in recent weeks to levels that have been seen just twice in the last 5 years. At roughly 1.7, the ratio is reflecting the extremely bullish posture of most investors (just who isn’t bullish about 2010 besides Credit Suisse?). This rare divergence between large and small stocks occurred in Summer of 2006 just before small caps declined 15% and then occurred again just weeks before the market crashed in October 2008. While this doesn’t necessarily mean the market is about to tank it does imply that high beta assets have become unhinged when compared to their safer low beta counterparts. Investors would be wise to take note.

Yesterday, at a breakfast meeting I was asked by a friend where I thought the market was going. I didn’t have an answer for him. I am really torn between the ideas that “the trend is your friend” and the market is overbought. The market is clearly moving up in a slow trend making pauses to gather strength as it goes. This is a market you should be in if you are following the trend. On the other hand this market has been going up for a long time and a correction must be due soon. So, I don’t have an answer other than to be a very cautious bull.

Here is another opinion:

No Mas

I do not usually go to cash when the market’s bullish trend is still in place. However, this last Friday morning, as the market opened up, I decided that it was time to take a breather. As I promised I would on the Kudlow Report the evening before, I cashed out for all of my business cycle-sensitive positions except in one stock.

I want to be clear here. I’m not recommending this kind of cash-out strategy to anyone other than myself. My thinking is this: There is an upward trend in place now. However, the trend is weak and the risk of a downside move has been steadily increasing as volume has been low. In addition, there has been a lot of short covering, which hasn’t been sufficient to propel market upward. At some point, the shorts are likely to regain the upper hand.

What I’m seeing, then, is an interval in which the market is once again more of a roulette wheel than a poker game — a gamble, rather than an intelligent speculation. In such times, I would rather lose a few percentage points of upside by staying out of the market than lose as much as 5 to 10% in a pullback or correction. And for the record, I don’t mind being in cash for weeks and months at a time. I prefer to make my money and big chunks rather than small; and to do so, patience is the most important quality.

In the coming week, we are going to see the end of the quarter where I expect a lot of mutual funds will be closing out positions to take profits and make themselves look good. That’s downward pressure on the market. We’ve also got the jobs report at the end of the week — that’s uncertainty for the market. In addition, tax day is coming up and it is always kind of funky for the market. So my strategy now will be to wait and watch — at least for a bit.

On the whole, I favor macro trades. At this point, what I will be watching very closely for is any sign that the long end of the yield curve starts to resume its upward movement. I continue to think that shorting the long bond is eventually going to be one of the great trades of this decade. ..by Peter Navarro, Ph.D.

I am in the process of reviewing my market strategy and approach which is taking a lot of my time. Whatever I am doing is not working to my liking currently. Here is a good comment on the current market statistics I found.

Meaningful Statistics

The market took a decidedly bullish turn this morning when the February Personal Income and Consumptions reports were released. It wasn’t that either report was strong rather it was the fact that while income was stable, spending actually rose thus consumers saved less. Since consumer spending is 70% of our economy it appears that they have decided to open their wallets just a little more and that gives the stock market feelings of hope. Are consumers coming back after being very reluctant to spend for well over a year?

Also, these two reports indicate that inflation, year over year, is only at 1.3%. Unlike the CPI and PPI reports we had last week the Personal Consumption Expenditures part of the reports out this morning exclude food and energy. This is an effort to gauge underlying inflationary pressures and there is none to see. Of course you and I can’t exclude food and energy from our costs thus we see inflation many times when the government does not.

So these two reports provided a reason for the market to move up. Over the last two trading days the market was up in the morning only to give it all back by the end of the day. It would be nice to see it hold up this time. The investors and traders are having a hard time breaking through the 11,000 barrier on the DOW. It will be broken, but it would be nice for it to happen sooner than later….by Steve Peasley Investtalk.com

Greece brought the market down. Here is the information and an interview on the subject.

NEW YORK (AP) — Renewed concern about Greece’s debt problems short-circuited the big stock market rally.

The Dow Jones industrial average closed Thursday with a gain of just 5 points after earlier rising to a new high for 2010. Broader indexes slipped.

The market’s advance fizzled after European Central Bank’s president Jean-Claude Trichet told French television that Europe must take responsibility for its financial problems. That raised concerns about when a rescue for Greece might come.

Officials from European nations were meeting late Thursday to discuss their economic problems, and a deal was finally announced late in the day.

Investors have been concerned for months that problems in Greece and other debt-strapped countries in Europe would spread and spoil a global economic rebound.

“Any time we see comments about it it seems to spook the market,” said Adam Gould, senior portfolio manager at Direxion Funds in New York, referring to Greece’s financial problems. He said traders still expect Greece will get a bailout but the questions about how unnerved investors. “It’s more the uncertainty.”

The concerns about Greece weakened the euro and raised demand for the dollar. The climb in the dollar hit prices of commodities like energy. That, in turn, hurt shares of energy and materials stocks.

Here is an interesting interview. Philip Manduca seems to have a very clear understanding as to what is happening in Europe and what you should be doing. It is about eight minutes long. Watch the Dow drop as he is talking.

Keeping an eye on the situation in Greece, with Philip Manduca, The ECU Group Head of Investment.

Today, was another beautiful day in Silicon Valley so I went golfing. Here is a picture of the course I played on, just a mile or so from the Pacific and twenty miles from Pebble Beach.

Elliott Wave

To get back to business, the indexes have been forming a classic Elliott Wave formation (see below). The third wave which we are currently in can go for a very long time. The third wave is also famed for suckering bears into believing it can’t rise any further but fooling them by moving even higher. Chances are this market has some upside to go yet..

In Silicon Valley it is spring. The sun is out and plants have begun to grow. The wild grasses on the hills around the valley are changing from the winter green to the summer brown. Yes, the cycle of nature is continuing just like the business cycle. My feeling toward the spring coming on, jobs opportunities and the markets is very positive. I am considering again making major investments in these markets. But wait, it seems whenever I get these feelings there is a 60-40% chance we are due for a correction. So, I guess you just invest in quality-solid stocks and keep tight stops on them until you get a clearer direction.

Waiting for the Next Inflection Point
By Barry Ritholtz – March 23rd — The Big Picture

What are the pros doing?

I’ve been speaking with various institutional investors, and I can tell you there is little in the way of uniformity of thought. Here we are, up 70% or so from the lows of over a year ago, and there is no consensus which is probably a good thing.

What are they thinking about? The health care bill, financial reform, the federal deficit, tax policy, a bubble in china, hyper-inflation, structural unemployment, another lost decade, and even demographics, their concerns are many and varied.

Their investment postures are even more varied. I can oversimplify them into one of five buckets

1) All In: They caught the bottom, or jumped in not much after it. They have been long and strong the whole run. They see no end in sight. Some are leveraged, some used options. My estimate: About 10% of pros fall into this camp.

2) Not-Too-Late: They joined the party later in the rally, and are still carrying some cash (10-20%) but not excessive amounts. They are not sure why we have been going higher, but feel they must participate. (About 20% of pros)

3) Reluctantly, Partially Invested: The group that originally fought the rally, but honored their stop loss discipline to flip from short to long around June of last year (after the pullback reversed). They are a combination of Global Macro traders and Long/Short funds who hate this environment, along with Trend followers who don’t want to fight the tape. They are carrying too much cash from 20% to as much as 50%. Many are looking for the next opportunity to get short. (About 30%)

4) Bought It, Sold It, Waiting for Clarity: This group had a very good 2009, but did not want to overstay their welcome. They hit the bid near year end, and took huge performance fees. They moved aggressively to cash – 50%+ and have dabbled on the short side. They are waiting for the next inflection point to redeploy capital in either direction. (~20%)

5) Missed it Totally, Waiting for Vindication: The “structural economic problems” and “Unconscionable Federal Reserve actions” have kept this group out of the markets. They are awaiting the next leg down, a retest of the lows, and then a break even lower. They are well stocked with Puts, bottled water, and MREs. This was a bigger cohort, but investor pressure and stress have reduced their numbers. (Down to less than 5% of hedge funds)

That’s about 85%, as there are others who simply don’t fall neatly into one of these buckets

Being located in the Silicon Valley and having worked in software development, I find new products interesting. Google still has a very bright future. They have a new web browser which I use called Chrome. I find it better than MS Internet Explorer. This little three minute video explains how they are going to take the Chrome browser into an operating system. Google is clearly a stock to consider.