January 2011 thoughts

I see continued quantitative evidence for the rally to continue in the intermediate term. However, the further we rally the higher the probabilities of a correction before we continue to go higher. This will be my prediction going forward. We may get further upside early January but I'd be looking for some sort of correction (catalyst unknown but I'm thinking Europe sovereign or China rate concerns) before we set off again. I'm absolutely positive that any sell off will present another buying opportunity just based on how strong the tape readings have been. I can't see a change in the overall nature of the market from a bull to a bear (this normally takes time anyways as all the research shows that markets don't suddenly reverse from a bull to a bear but tops take time to form). We still have ultra low interest rates in the advanced economies (ie a very steep yield curve), accommodative government and central bank policies, equities are still cheap relative to bonds, economic data improving and the market is trending up (so you have to give it the benefit of the doubt).

I just wish at this point that we actually get a nice down day so I can get long again!