This blog post originally appeared on RealMoney Silver on April 20 at 7:35 a.m. EDT.
After a doubling in the S&P 500 since the generational bottom of March 2009 -- what is an investor to do?
Tactically, I remain of the view that we are in a trendless and narrowly range-bound market, but the risks (technical, economic and market) remain to the downside, despite yesterday's ramp and the strength in futures this morning.
There is still the consensus view that the domestic economic recovery will be smooth and self-sustaining, even though first quarter 2011 will likely come in at almost half the growth rate that was anticipated two months ago.There are numerous reasons for this optimism. Most importantly, the on-the-ground fundamentals, low core inflation readings, low interest rates and reasonable valuations are supportive of that view, though I contend that the foundation of growth is a lot shakier than suggested by that consensus. With fiscal and monetary stabilizers being lifted shortly, a still-moribund housing market haunted by large shadow inventories of unsold homes, growing sovereign debt risks (e.g., Acropolis now) and our profound fiscal imbalances (at the local, state and federal levels), the tension between the tailwinds of growth and the nontraditional headwinds that challenge that growth should serve as a continued tug of war for investors. So, we likely remain stuck in the middle between 1,250 and 1,350 on the S&P 500. Bulls and bears will remain frustrated, but opportunistic traders should have a field day. The temptation to buy strength (like today) will be intense, but I would not chase strength (nor would I sell weakness). Instead, I continue to favor buying the dips and selling the rips. Keep your powder dry, stay flexible in approach, and don't trust Mr. Market, who has no memory from day to day. Doug Kass writes daily for RealMoney Silver , a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass's daily trading diary, please click here.