Up or Down? 04/02/12

Up or Down? That depends on which market we are talking about.

I was surprised to see a down signal on IIF the India fund. Saw similar weakness in FXI or the China fund ETF, as well as a down signal on EEM, Emerging markets ETF. It is surprising that the US is currently one of the strongest markets this year. My signals for the DJ30 and SPY remain long and Up and that is my bias in my portfolio.

I think we will find a reason to pullback eventually. It could be the fact that we will eventually realize we are running up against the debt ceiling again and the long political battles will begin again. For now, I cannot bet against a rising market other than keep hedges or insurance on a surprising downward move. I am reading Nassim Nicholas Taleb’s book “The Black Swan” and have to agree with some of his thoughts. It is far better to make money by not having large losses.  That can be achieved by insurance and redundancy.

He also makes a great point about not totally relying on past data to make future decisions. For example the turkey that had a healthy life for a thousand days would find everything changed the day before Thanksgiving. Nothing in the past data would have given the turkey information about what was to come. I admit that my Metastock systems look at past data. I look at it as just telling me for the next day, one day at a time, what the state of health of the chart is. But I cannot predict a black swan event and accept its possibility.  Therefore to protect my portfolio I carry insurance against the black swan event. And yes, I carry life insurance on myself as well as on my cars and home.

I am attaching a chart on the IIF as well as one on SPY to show the contrast.

Next week, I will post my 401K analysis for the month.