Phony Dow Mania Bites the Dust

 | Mar 05, 2013 | 10:33 AM EST
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In case you are trading in Outer Mongolia via smoke signal today, the big news this morning is that the DJIA surpassed the highs hit in 2007. There has been so much talk about this I suspect it became self-fulfilling. But the market must take out this emotional level before logic can apply again.

The media spin on this news is that things are improving and the market is obviously healthy since it has more than doubled from the March 2009 lows. That may be true, but I believe the real lesson of this market is that if you want to make money, you had better learn how to trade.

The folks who bought and held stocks in 2007 have not made money in over five years. The Warren Buffett approach would have produced poor results for those who were highly invested before the crash of 2008 and 2009.

However, just to show how perverse the Market Beast can be, those who bought and held in early 2009 really put up stellar numbers. Active trading during the last few years has been challenging because quantitative easing has so consistently produced straight-up, one-way action.

In 2008 and 2009, we learned that buy and hold was deadly, while in the following years we learned that sticking with the trend as long as possible was the best way to make money. It just goes to show that market players must constantly adapt if they hope to produce superior results.

Buyers are on a mission to put new highs in the books this morning, and very strong action is the result. Breadth is running almost 4-to-1 positive and the only sector in the red is retail. Biotechnology is leading again and precious metals are bouncing.

I added to a position in Goldfield (GV), which was a recent Stock of the Week, and I added to Sarepta Therapeutics (SRPT), which has a recommendation this morning as well as some negative comments. Technically, SRPT has been developing well and I believe it may be a short squeeze candidate.

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