If you thought the past six months have been fun, then you should really enjoy November. Six months ago, the market took a bit of a dive and immediately, the “Sell in May and walk away” slogans were offered up as some kind of evidence. A lot of people seem to have fun with market “history” and playing around with these supposed facts is not going to end in November.

Since May, the market is up 5.1% and makes up half of the year-to-date returns. How can this be? So much for slogans and historical market wisdom. By July, the market was being badmouthed all over the place with $75 per barrel oil, Iran and North Korea bluster, Israel / Hezbollah, FOMC rate hike fears, etc. Kinda makes you wonder how it was ever possible that we managed an 8.5% gain since then. We had warnings about how tough August is historically as a month and then the same was said for September and guess what? - boy those Octobers are really tough. HMMMM? Were they “tough”? I think so. And yet, each month set some record or another for the “best month since {insert meaningless dates here}.”

Some really good economists, analysts, market strategists, and untitled other smarties all weighed in about what was going to happen and for the most part they were wrong. Now, it seems we have made it to the promised land of November and the all-too-certain “year end rally.” Sounds fun and so reassuring, but it’s really time to start being concerned don’t you think? I am not saying that the market is going to go down because many of the same people that were convinced we could not advance for the past six months are now saying we are going to have smooth sailing on this momentum wave through the end of the year. That’s not what I am saying but I can understand how you might want to question the logic of that contrarian thought.

What I am saying is that you should start making a sell list. It’s funny that we never hear much about the merits of creating a sell list, but it’s all too often that the permabulls advocate the need for preparing your shopping list or wish list or buy list (whatever you want to call it.) I am guilty of advocating it too, but the last time I did that was mid-June, when many others were dumping shares. So now I am going to do the opposite and tell you to get your sell list together and be ready when the time comes. The HEDGEfolios Timing Indicator is still showing a bullish bias, but I have a feeling a sell-off is coming in November, so don’t let the games begin without being ready.  You should be selling individual shares when they turn over, not when the market finally turns over.  It’s easier to get out at decent prices when the market is going up.  I know that seems tough to do, but you have to fight through tough things.  After all, you fought through August, September and October and we all know how tough those can be.

Last week, I posted a list of 178 UP signals that I was reiterating as they looked like they were gaining some momentum. While I only did this for a one-week period to show you another way to use HEDGEfolios, I’ll remain bullish on these until either the technicals or fundamentals cause me to change them to a DOWN signal.

As promised, I am providing the scorecard to see how this turned out. An equally-weighted portfolio of these 178 stocks from the 10/24/06 open until the 10/30/06 close would have generated a 1.87% return compared to a negligible S&P 500 gain of 0.07%. For the week, 62.9% (or 112 out of the 178 stocks) went up. There were a few stinkers in the bunch, with 6 stocks violating Bill O’Neil’s 8% rule and the worst of those coming in at a 13.3% loss.  However, 65% of the losers were less than 3% so I feel pretty good about keeping these to a minimum. Regarding the winners, 60% were between 0 - 5%, 30% between 5 -10%, and 10% were above 10% gains.

Every election period we get barraged with the message that politicians are primarily responsible for the economy and the markets. Who can forget “It’s the economy stupid” and all the sentiment that encompasses? It’s almost as if we should assume that companies are run by the President, Senator, or Representative and not the voters. If the economy is bad, the out-of-power party attempts to tag the incumbents with all the blame. If the economy is good, the incumbents try to take all the credit - except this time it isn’t working. In this election, the Republicans can try all they want, but the economy and the markets are not resonating with most voters.

Of course, I don’t believe the merits of any of these claims. The economy is run by voters and except for a few macro issues or specific trade policies, I think the impact of politics on our business climate is grossly exaggerated, especially at election time. For the most part, it’s a great vote-getting tactic for the masses who love to place all the responsibility for their lives in the hands of the government. I do buy into the impact of taxes on consumer behavior and their trickledown effects on the economy, but that is about it for me. I choose to believe in capitalism and have great faith in producers and consumers to determine the course of our business success or failure. I know that may seem ignorantly unAmerican with all the brainwashing going on during the campaign ad blitz, but I am sticking with it.

Even more ridiculous is the debate about which party is better for the market. Each side points to certain bullish periods in the market history and spins that they are the cause of the gains. We also get studies that attempt to show what combination of control works best for the market such as split Congress with Democrat president or one-party dominance like the past few years, etc. etc. Some suggest that the market loves gridlock in Washington DC and in my opinion, all this theory is a waste of time.  I hope that none of these massaged statistics will influence your vote. There are so many political issues to evaluate that actually mean something - please focus on them.

The last time I checked, very few politicians were known for being great investors. I’d love to vote for Warren Buffett, but he isn’t running. On the other hand, I don’t find Bill Frist’s questionable HCA trades, Hillary Clinton’s cattle future investment, Harry Reid’s Nevada real estate windfall, or any number of politician investments to be inspiring. Their investing “prowess” wouldn’t encourage me to vote for them or against them. It’s funny, but I vote for politicians based upon their political beliefs, not their investing beliefs or the mistaken belief that they will help or hurt the market. Once again, I just want to remind everyone that voters buy and sell stocks. Maybe we do it with a hint of the political aspects such as capital gains tax or dividend taxation, but I doubt that it is ever the sole reason we are willing to buy a stock, even pharma or big oil. If I am wrong on all this and the market is just a puppet for one politician or another, VOTE ME OUT!

“The market is down!!! Oh my!!! Hurry - we must come up with some ridiculous answers to why the market is down. If we keep repeating stuff the audience will listen. They are just thirsty for accepting the easy answers we give them.” Those are not direct quotes but I can only imagine that financial media must be saying stuff like that. I hope that you all get as annoyed with this as I do, but I suspect that is not the case for most bubblevision watchers. We have one day that doesn’t fit the perfect scenario where most everything just keeps heading higher and people start looking for excuses. I have no idea why the market is down today and I really don’t care. It is not worth the effort to find out because my experience is that tomorrow is another day, with a whole new search for explanations or excuses. More importantly, most of what we hear in the subsequent trading days will conflict with the “facts” from today. Certainly the GDP data had an impact, some profit-taking on a Friday, Saudi terror threats, marginal oil price increases…..take your pick. However, I doubt it had much to do with CNBC’s claim of a negative tech report out of Asia from a Goldman Sachs analyst. If people spent more time studying actual data relevant to their portfolio like the fundamentals, news stories and technicals they wouldn’t have time to go looking for excuses. Finding easy answers posited by financial media will not make you much money - doing your homework will.

Katrina, Rita, Wilma - they were terrible - and so were many weathermen that I will not name for protective purposes. But that is their job and yet, I find fault with some in the energy pits. Many energy traders looked to NOAA and its National Weather Service Climate Prediction Center to generate bets on the oil markets. Initially, NOAA said “the 2006 Atlantic hurricane season outlook indicates an 80% chance of an above-normal hurricane season, a 15% chance of a near-normal season, and only a 5% chance of a below-normal season.” And later in the May report they said “The outlook calls for a very active 2006 season, with 13-16 named storms, 8-10 hurricanes, and 4-6 major hurricanes.”

When that didn’t happen, oil dropped and Amaranth suffered the impacts of taking the wrong side of the natural gas trade. I’d prefer that our oilmen didn’t pretend to be weathermen or that weathermen didn’t pretend to be weathermen for that matter. At some point, it all gets a little nuts and even more so when I hear the most recent prognostications from the guys that sit in front of radar screens, not fundamental or technical screens. In case you missed it, here you go: “Meteorologists at the NOAA Climate Prediction Center released the latest seasonal outlook, which reiterates this winter is likely to be warmer than the 30-year norm (1971-2000) over much of the nation, yet cooler than last year’s very warm winter season.” Very impressive! Remember - this is the same organization that told us there was an 80% chance of having another bad hurricane season. Now we are hearing how the growing El Nino pattern will give us a warm winter. Once again, oilmen are betting that the weathermen are correct and are using it as a justification for lower oil and gas prices. Brilliant!! I am not saying that I know what weather we will actually have, but give me a minute and I’ll stick my finger in the air and I’ll come up with a forecast. It cannot be any worse than the hurricane experts came up with and look how much money that cost us. Good luck with the weather this winter no matter where you are and please don’t let it affect your investing too much.

In June and August 1999, Bob McTeer, President of the Dallas Fed became known as the “Lonesome Dove” for being the only FOMC member to vote against Fed rate hikes. Today, we have a new bird - the “Lonesome Hawk” - aka Jeff Lacker. Going into the meeting, I expected that Lacker was going to have some company with a vote for a 25 bps increase to the Fed funds rate. I was wrong about the vote and mostly wrong about the statement which was predominantly dovish. Regardless, Mr. Lacker is a man of conviction and so is Mr. McTeer. I get the sense that everyone is getting a little annoyed with Mr. Lacker’s obstinance and just want him to step in line. I doubt that will happen until he is firmly convinced that he is wrong about inflation. One thing that Mr. Lacker and all the rest of us should remember - Bob McTeer was right as the Lonesome Dove even though it wasn’t easy or popular to be right. At a time when the market is fixated on Goldilocks, I respect Lacker for providing the alternate view.

I know I sound like a scratchy-if-not-broken record that is trying to play polka music at a rap concert, but here goes even if you are tired of me being less than excited. This market appears to be weakening to me. On Sunday night, I offered up a “well-timed” piece that expressed a warning sign that kept bugging me when I did my analysis for this week’s signals. The market promptly took off yesterday making me sound like a moron and yet, I wouldn’t change a thing about my cautious post. As you will note from looking at the stock signal changes this week, I gave 177 new DOWNs compared to only 72 new UP signals. That is not unexpected given that the HEDGEfolios universe currently has 3 times as many stocks with bullish expecations. However, it makes my point that there are less stocks out there that are not already owned. I don’t see a new round of stocks to be uncovered that look like new leaders able to push us higher. Bulls will have to rely on more money being poured into existing winners to keep the momentum going. Based upon some of the money flow data, it does seem like retail investors are pumping up mutual funds with portions of that excess cash sitting on the sidelines. We’ll see how long that lasts but don’t underestimate my respect for the ability of late-to-the-party investors to prolong a rally.

I expect tomorrow’s reaction to the FOMC decision to be a negative for bulls. I don’t believe we will see a change in rates, however, I think the Hawks will be given a chance to jawbone their concerns for inflation and therefore, the statement will be frustrating for the crowd that had prematurely started to price in a cut when they finally got done with their “one-and-done” bullshit. Additionally, I think Jeff Lacker might get a voting buddy (or two) this time around.

I continue to stick with several of my forecasts from the what next post especially those regarding higher levels for treasury rates, oil, and commodities. It appears that my concerns about North Korea and Iran were correct, but the markets really didn’t care, so go with the markets (not me.) Most importantly, I was wrong (so far) about the strength of earnings season. If reports continue at the existing pace, we will likely see 17% earnings growth and guidance has not been overly discouraging. This is a legitimate reason for the bulls to be happy.

As for me, I am still bullish but something needs to change for me to believe that the current move will push us much higher.

I am offering up a list of reiterations on UP signals. Many of these are losing signals and have taken a while to turn higher so you should be wary. It’s something that I haven’t done before and if it doesn’t turn out well - you won’t see it again. But given all the momentum, I decided to have some fun and mention stocks that I think have a good chance of doing well if momentum continues this week. In the past, people have asked me to provide a list of my “best picks” - this is not one of those kind of lists and you will never see that here. I try to make each signal “my best” and am committed to treating each stock the same and each investor the same. Besides, this is not a stockpicking site. I don’t know who you are and what you are interested in so it is impossible for me to suggest one UP signal is better for you than another - that is for you and your financial advisor to decide. Anyway, I am going to give you a long list of symbols to wade through and a week from now I will post the performance from today’s open (10/24/06) until next Monday’s close (10/30/06). WARNING: With any momentum stocks, a change in the market’s sentiment can have significant impacts on the direction and price so when that is the case, I advocate tight stops.

Here goes:

I got a good laugh today compliments of an email from the administrators of PhatInvestor.com. When I first started trying to get users to the READ section of HEDGEfolios, I asked for it to be included in their aggregation site. That was about 6 months ago and to be honest, since I never heard back from them, I forgot they existed.

Since then, HEDGEfolios has really taken off and some of the bloggers I respect like Charles Kirk, Barry Ritholtz, and TickerSense (see my blogroll) consider my commentary to be a blog. To be honest, as much as I like to write, the READ section is just a mechanism to summarize my thoughts on the market and the individual stocks I cover. I’d much rather be regarded for the database sections of HEDGEfolios and the quality of the UP and DOWN signals that you can find there. To those of you that consider me a blogger, I am not offended but I recommend you try out the rest of the site. To those of you that prefer the signals, I hope you enjoy my blog.

Back to my email from PhatInvestor - here it is in its entirety:

Thanks for submitting your blog to PhatInvestor.
We have reviewed your blog and found that this is not suitable for our directory.

If you have any questions regarding this decision, please write back an email justifying why you should be added

to our directory and how your blog is useful to the financial community.
not a blog

thanks

I replied by thanking them for the laugh and suggested that they contact me if they ever change their mind. I am not holding my breath and I am not going to try to “justify” anything.   In the meantime, I think I will go back to blogging or not blogging, whichever the case may be.  And I do hope that my thing that is “not a blog” is “useful to the financial community” or at least to the part of the community that actually reads it.

By the way, I’ve had a positive experience with the leading finance blog aggregator, Pfblogs.org and they actually consider the READ section worthy of being called a blog. Go figure!

Last week at the Money Show, I spent a few hours talking one-on-one with Ralph Bloch.  Amazingly, we spent very little time on the current market or technical analysis techniques so I have nothing to share from the conversation that will help you be a better investor.  As I have mentioned in previous posts, Ralph is one of the few technicians and market commentators that I feel should never be ignored.  He may be retired from Raymond James, but I doubt he will ever be retired from the market.  When I get my first copy of his new market commentary newsletter, I’ll provide all the subscription information for those of you that don’t already get it.