Tug of war - Bull vs. Bear Part 3

Here comes the correction! If you had followed my post, I seriously hope you didn’t buy HIGH and (later) SELL low with fear being the current sentiment.

Since my last post in early March, the title post remains the same, ‘Tug of war’, meaning I called for markets to trend sideways. My speculation then was that the equity market would not have any more energy or the catalysts to proceed further north.

The title post is the same, with the exception it is part 3! It is still finding direction and definitely not the finale!

Let’s look back with hindsight. If you had tried to chase the market after mid Feb, the risk reward, by calculation would not be attractive at all. By buying ‘very’ high (which I WARNED) there will be more worries and no excitement at all.

Since mid Feb, markets eked higher but corrected when the Fed Chairman made no mention of QE3. And when the sentiment was bearish enough ‘helicopter’ Ben hinted that QE3 is not off the table. Markets reached out higher where it gave the sentiment that the rally had resumed.

Enough act from America I think. Here comes the next scene but from across the Atlantic. It’s no longer Greece but Spain. Spain bond auctions were not well received. Risk off was the then sentiment. China PMI releases and weak data made the puzzle more interesting.

The story goes on and on, up and down, weak and good, etc with the last straw – weak data release where US nonfarm payroll – released on a ‘Good’ Friday where most markets were closed. ‘No horse run’ is my best bet where most investors could not exit.

If that doesn’t hurt sentiment US Equities saw further heavy selling as, across the Atlantic, European sovereign debt worries moved back into the forefront. Selling of peripheral debt caused the Italian and Spanish 10-yr yields to spike.

Markets had been playing investors like a yo-yo. (I am the spectator.) Fortunately, if you followed my post you would not have been a victim. The yo-yo is still-in-play and calculated events would determine the ‘buy’ entry.

US markets had closed badly with an average lost of 1.7% bringing the Dow and S&P 500 back to 12,715 and 1358 respectively. The market made a turn and came back where it was where I last posted! My speculation is that the US markets will pass the baton to Asia then to Europe. Earnings season should dictate henceforth.

Alcoa, a Dow component triggers earning season by beating estimates after the bell.

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