DJIA's above 14,000! What to do?

The Dow Jones ended above 14,000 points for the first time in more than 5 years! Could it go higher? Are retail investors coming back in a big way?

"I would say in the 30 years I've been watching it, this is the least amount of retail interest waiting for a pullback, or waiting to jump in that I've ever seen," said Scott Wren, senior equity strategist at Wells Fargo Advisors, which focuses on retail investors. "Probably and unfortunately for a lot, it's going to be a lot higher before they get in."

Wren said the move to 14,000 is at most psychological and won't be that important to disenfranchised investors. "When you run into people at parties, unless they're in the business ... the stock market isn't even a point of discussion. There's very little conversation. There's very little excitement about the market," he said. "It feels to me like there's a little bit of chasing going on, but not very much at all. I don't expect it any time soon."

Source: Yahoo! Finance.



We are but frogs in wells. We see what we believe to be real.

As long as there are still investors out there who are sceptical of the stock market, who are heavy in bonds and cash for their perceived safety, there is room for stocks to go even higher. When everyone is bullish on stocks, when there is no one left who would stay away from the stock market, then, the fuel is spent.

So, pick out a few good stocks which are still undervalued and hold on to them. However, this does not mean that we should avoid trading for some short term gains in the meantime. After all, share prices climb a wall of worries in an uptrend and do not go up in a straight line.

Related post:
1. Noises, voices and choices.
2. Be comfortable with being invested.
3. Tea with AK71: A frog in a well.

Marco Polo Marine: Negative divergences.

Although the fundamentals of Marco Polo Marine are sound and its future looks bright, Mr. Market is not known to respect fundamentals. Mr. Market is a creature of sentiments.

Technical analysis provides a window into the collective psyche of market participants and when there are negative divergences aplenty, we should exercise caution when thinking of initiating a long position or adding to a long position.

The presence of negative divergences does not mean that the share price will definitely weaken. It does not mean that the share price will not go higher. It just means that the risk of a retracement is now higher.

So, how do we respond to something like this?

Personally, I have not divested any of my shares of Marco Polo Marine. I am that confident of the company's prospects. In fact, if there should be a pullback to supports, I am likely to add to my long position.

So, is buying on pullbacks at supports a sure win strategy? Not at all. Supports could break and price could go lower! If that disturbs you, you might want to hold on to your money. However, if price should rebound and go higher, would you kick yourself if you had held on to your money?

If the fundamentals are sound, lower prices would present greater value. Why wouldn't we buy? The trick is in buying at supports and pacing ourselves as we do so. Don't throw in everything including the kitchen sink at the first support on retracement.

Some would say to wait for clearer signs of an upturn before adding to long positions. That, I feel, would work better in a downtrend. In an uptrend, buying at supports on pullbacks is what I would do. Go back one blog post and you would know what I mean.

Finally, just to add the confusion, technical analysis shows where the supports and resistance are but there is no guarantee that these would be tested at all. This is where hedging comes in. Something to think about over the weekend, perhaps?

Related post:
Marco Polo Marine: Looking into the future.