Summing Up My Concerns
"We still need the development of some events that are going to scare the hell out of people. That's what gives rise to that great environment where everybody wants to sell and nobody wants to buy. That's the raw material for our greatest returns." -- Howard Marks, Chairman of Oaktree Capital Management ( OAK)Howard Marks' quote above rings true to me. There will likely be better times than now to be buying stocks at the margin. I am very concerned about the potential for a disappointing downturn in corporate profits, the likely deterioration in China's economy and a more rapid decline in the eurozone's economy than is generally expected in the months ahead. I will move back into a long position when conditions dictate, but, for now, with extreme levels of complacency, I am more bearish than I have been in a while. Time and time again, what I have learned throughout my investment career is that market participants prefer the comfort of crowds rather than the company of the remnants. Investors and traders, as demonstrated in recent years, seemingly prefer to buy strength and sell weakness than to address, anticipate and prepare for an inflection point or change in market direction. That helps to explain why the recent low-volume market rise has been greeted with growing optimism by relatively complacent investors. That said, the chart below on the S&P 500 (when combined with the low VIX reading previously discussed) suggests that a possible and classic triple-top in the market might be in formation. (If this turns out to be a triple top, a yearly market high might be close at hand).