Caution!

Two weeks ago, the Bull wrote a cautionary blog commenting that stock prices do not grow to the sky. The investor elation after the election has almost propelled them to it. Look at some of the popular growth names and you will see a decided acceleration to higher and higher prices. Their price charts look parabolic; we refer to these stocks as being “up on a stick,” with the recent price action going straight up.

In addition to the worrisome action, we are seeing a deterioration in money flows into stocks. There are increasing signs of quiet liquidation as so many are giddily buying. Another technical measure, such as the number of advancing stocks to declining ones, (the “advance/decline line” in our jargon), is also lagging. None of this suggests that investors ought to liquidate long-held positions or disturb successful strategies. However, if you will need more cash in the near future, sell sooner rather than later. If you are thinking about committing new funds to the stock market, wait a while and assess the situation later.

Time will erase near-term timing mistakes, but when the market signals are so clear, why not, at the margins, use a little discretion in your favor? Remember the words of Warren Buffet, “What the wise do in the beginning, fools do so in the end.” We are living in interesting times, stay steady my friends.

-The Lonely Bull