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Letter 1551

October 8, 2014

With the Dow up triple digits one day and down triple digits the next, this is the perfect market to lose money in. Each decline is taken as a buying opportunity with investors confident that the Fed will not allow anything bad to happen. But one day the market will drop, and surprise -- it will continue to decline. My suggestion is that we refrain from trying to outsmart the stock market. The smarter we become, the cleverer the stock market becomes. "Sidelines" is a dirty word for most money managers, but our job is to avoid being whittled to death by a frustrating market.

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Technically we now have a problem. The advance decline (AD) line on the NYSE has turned down in the face of new highs in the Dow (see chart below). Thus we have a serious non-confirmation between ... Log in or subscribe to continue reading.

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