MY MARKET VIEWS AND RECOMMENDATIONS ARE ALL IN THE MARKET MESSAGE ARCHIVES
WHAT TO DO?... With the stock market starting to look toppy, I've been surprised at the number of messages I've received asking what to do in an environment of a weak dollar, rising commodities, rising interest rates, and a peaking stock market. Surprised because that's exactly the scenario that I've been describing since the start of the year. And also because I've been writing about what to do in that environment. For newer readers especially, I recommend that you review some of the market messages posted since the start of the year. You can get there from the John Murphy tab by clicking on "More Archived Updates". Two in particular that you might want to read (or reread) were posted on January 26 and February 18. The first one entitled "2005 Doesn't Look Like a Good Year" discusses the fact that the four-year presidential cycle works against the market this year and next, gives downside targets for a market drop, and explores the idea of a secular bear market January 26, 2005. The last paragraph (Sector Plays) recommends energy stocks (oil service stocks in particular), stocks tied to commodities, defensive groups like consumer staples and healthcare, large cap dividend-paying value stocks, and money market funds. That pretty much sums up my current views.
FEBRUARY REVIEW OF RECOMMENDATIONS ... The February 18 message is entitled: "A Review of My Market Views and Recent Recommendations" February 18, 2005. That message includes paragraphs on rising inflation, rising bond yields, why rising stocks are hurting REITs, and the fact that the basic material/financial ratio has turned up. That message repeats my sector recommendations including energy, commodity-related stocks, defensive stock groups, and money market funds. The paragraph entitled: "Clearing Up Some Confusion" spells out my recommendations even more clearly which include taking "some" money out of the stock market and rotating the rest into defensive stocks or stocks that benefit from rising commodity prices. Paragraph one repeats my Elliott Wave warning that "we've either seen the top or we're in the final rally leading to the top. In either case, the best way to deal with that is to sell into rallies".
OTHER RECOMMENDATIONS... On a global scale, other messages have recommended commodity producing markets like Canada. I've also recommended Japan because of its low correlation to other global markets. In the U.S. market, I've been recommending basic materials, gold, and energy (the latter on pullbacks). I've also recommended avoiding rate-sensitive groups like financials and REITS. I recently recommended utility stocks mainly due to the fact that they pay high dividends. More aggressive traders can do some short selling of the major market averages like the Dow Diamonds (DIA) or the S&P 500 SPDR (SPY). There are bear market mutual funds that rise in a falling market. And there are mutual funds that benefit from rising bond yields. These are all things that can and should be considered. I'm happy to read that a lot of you have been doing your homework. Forewarned is forearmed.
