No I have not turned bullish, but I am now neutral and will wait to see the nature of a retracement if any. During that waiting period, my plan is to increase slowly my exposure to the range of 50%, not chasing anything, but buying stocks that are in uptrend, that I have liked anyhow and that have retrenched somewhat from the exuberance.
I think that the question of leadership is still a very serious one. If you assume as the bulls do that we are in a cyclical bull move, you must assume it either started last October or at the recent low in March. The October lows had sufficient (when coupled with the July lows) extreme in sentiment indicators, to serve as a pre cyclical Bull bottom, the March lows certainly not. In both cases, however, we were faced with complete lack of leadership from the Dow, the two stocks that in the last four months managed to make new yearly highs (and I am not even asking for all time highs) where EK and MMM and during the last two weeks of this advance both have failed miserably. In the last week, not one of the Dow stocks have made a new yearly high. My backtesting of all prior major bottoms had at least 15% of that group making at least yearly highs within six weeks of the bottom creating a stable leadership taking the averages higher consistently.
Of course, no model that I know back tests correctly all the time, nor will any model be able to achieve such a feat. The market has a lot of momentum going for it right now, but we are also approaching a number of "exuberance" excesses. These excess can continue for longer than shorts can stay in the game (if they don't use rational stops). Respecting this momentum, I decided to increase exposure without turning bullish. Mind you I'll be very close to jumping off if some critical levels are breached on any retrace.
Don't you find it strange that from 9 suggestions of "safe shorts" I made during the last two weeks or so, only one has breached it stops (and those stops were all less than 8% above the suggested shorting range, most within 5%)?
My next major signal will most probably be another "to the hills" call rather than the "damn the torpedos full speed ahead".
Zeev
