I'm in a quandary. We are in a pretty decent moment for stocks. There's rarely a lighter time for earnings. I always know this, because I set time each early morning to go over the key conference calls and Thursday the only one I had to focus on was Oracle (ORCL) , a company that rarely has any serious pin action for tech.
We don't have a lot of macro news. Sure, we had a slightly hotter-than-expected consumer price index, but nothing that would make Jay Powell be on hold when it comes to cutting rates at the next Fed meeting. I don't envy him. Yes, he raised rates too high, but it's not like the economy is exhausted. And he's being labeled a bonehead by the president, which is really something I would say, but I am not the president of the United States.
Trade talks? Neither here nor there, but really in abeyance. So they aren't likely to surprise.
Yet, there's one thing I am concerned about, one thing that does have me worried, the S&P 500's proprietary short-range oscillator -- the one I have subscribed to for 30 years, the one that says be careful, be very careful, because it currently stands at 8, and that's really way overbought.
Now my concern may be way off base. The last time we were this overbought was when Powell switched directions, and we were no longer fighting the Fed. It was a time when the market never really quit.
But, historically, I have not made a lot of money when it's at 8, in the same way that I have not made a lot of money when I sell at minus 8. The buyers usually get exhausted when we get to this level, in the same way that they are pooped when we get down so long so quickly.
So, as I said in my Action Alerts PLUS member club call Thursday morning, if you have some gains, it's OK to take something off as we did for my charitable trust.
Now, I am sure there are some of you out there who think that I am just some sort of plain old, superstitious guy. I mean, Warren Buffett doesn't look at an oscillator, does he?
But I think that's the wrong way to analyze things. I believe there is nothing wrong with trying to get the best basis and something right by fearing a top-tick. I discourage you from buying right now, because when we get this overbought, if there is negative news, we tend to get a violent pullback.
Where could that bad news come from? This is the toughest thing about having conviction in the oscillator. I don't know where it is going to come from. I just know that until we work off the high level reading, I fear that we will be blindsided by something. That's been the case too many times to count.
So, if you are going to initiate a position or if you are going to contribute to your IRA or 401(k), I am saying that it might make sense to wait it out. The oscillator, which is rarely wrong, says you might get a better level. When in doubt, remember, discipline always trumps conviction and, to me, the oscillator's the discipline that says don't buy. Don't buy .