This morning I outlined Four Roadblocks that prevent me from having a more positive view of the market. The key problem is that the price action just isn't strong enough to give me confidence that we will see sustained upside in the near term.
My approach to the market is reactive. I want to see some hard proof before I put substantial capital at risk. This means that I'm not going to be fully invested at the exact low. I will miss some of the early positive action but I don't have a problem with that because I believe that reduced risk will allow me to be more aggressive and make up for any early underperformance.
Doug Kass takes a more anticipatory approach. Doug has a high level of confidence in his predicative abilities and is willing to buy into the teeth of a decline when he believes a turn is close to occurring. When his timing is right he can do very well but I have substantial doubts about the ability of anyone to predict market turns.
The point is that everyone has to find a style that works for them. I am comfortable with a more reactive approach that doesn't try to pinpoint exact turning points. Doug obviously like to focus on calling tops and bottoms. What works best depends on the individual.
Currently the indices are acting poorly and the S&P 500 is testing its intraday lows. Breadth is running 3-4 negative but what is most troubling is pockets of very weak action in groups like retail, biotechnology and banks.
Banks are particularly worrisome as many strategists were looking for a bounce to help drive a reversal in the overall market. Small caps are lagging with the Russell 2000 ETF (IWM) down around 1%.
I keep writing about better stock picking as being the key to a market turn. We still aren't seeing it. In fact there is deterioration in the chart setups today rather than improvement.
It is another disappointing day of action so far so I'm staying patient.