My head is spinning…it might be a general lack of sleep as I am trying to cram in all the work I get hammered with on the first of every month. On top of the weekly signals of the 4000 plus stocks and ETFs I cover, I did my monthly analysis of all the fundamental valuation metrics that define the general criteria used to sort the HEDGEfolios database. All this on top of driving half way across the country yesterday and editing / writing the cover review for a great new technical analysis book (more on that next week). I am not complaining as I love doing this whole thing…it’s just that I am trying to complete the 50 plus hours of analysis in half that time. In a few hours I’ll be on my way to an island with sun, sandy beaches, a few beverages, good books and almost a total inability to watch the market. I probably will not be able to sleep until the plane ride and then all this effort will be a distant memory. But for now, my head is still spinning and despite my earlier comment, it’s not about the lack of sleep or too much brain exercising. This market makes me feel like Up is Down and Down is Up. All week long I watched as one bad bit of data was spun as bullish and only surpassed by each successive clunker which took its turn being spun into fuel for new record highs - China syndrome, nearly 0% GDP, rising inflation and uninspiring job growth. Who cares!?!

I have been bearish since April 30th and with the new signals given this week, the HEDGEfolios Timing Indicator found its way to a marginal bullish crossover. I am still holding out for confirmation from the signal indicator but since it’s 49% bullish, I suspect that I will be reluctantly placing a “bullish” vote at Birinyi’s Ticker Sense poll when I get back from La La Land. Those people that put me in the permabear camp will likely point to this hesitancy as a sign of my negative condition but to make that claim, they’ll have to take some time out from their ignorant worshiping of my real reasons. On top of the crappy economic data, I don’t like the market forces for June that I wrote about in the previous post. Not to mention the geopolitical risks that keep popping up, the inflated foreign equity markets, and all that other bad stuff that the bulls just love. We are in a mania here despite what that maniacs are telling you. The picture I drew of the market this week looked like a giant bandwagon passing me by. On it there were thousands of partiers going wild and apparently having a great time. As I looked at the sign on the back of the wagon, it said “Looney Bin or Bust.” The bulls maniacs case for this market is resting on the record-high hype, humongous momentum, short ass-kicking covering and squeezing, M&A speculation, and buyback manipulation. Sounds like sourgrapes? Maybe it is. Look back at past posts before market declines where I made similar comments. Those sourgrapes turned sweet. Let’s see how long these stay sour.

On a positive note (for once), I found very few stocks that weakened over the past 4 trading days. However, as a technician, I just don’t do well with breakouts and light volume momentum like we had. So rather than playing along, I say - “That’s impressive. Nice job. Have fun with it and I’ll see you back here later.” I could have probably changed another 500 stocks to UP signals but there was a problem with doing that. I would have to throw out all that I know and all that I am comfortable with and pretend that I believe all the hype that is floating around.

Unlike many bears who jump in the ring to fight and throw in the towel before the Round 1 bell has been rung, I can take more punches than Rocky. And when you bears think of getting back in the ring with your towel at the ready, either stay the hell out, try getting some balls or just shove that towel into your protective gear. Courage without conviction and perseverence will get you killed.

I’ve been told that I just need to accept it and move along and yet, the permabulls have done so well without me. Why do they need me now? Each week I look at every one of the 4000+ charts and say, does this look like a good time to enter or exit? If, in hindsight, I say I should have entered weeks ago when the stock was 10% cheaper, the answer is that I cannot compound my error and I don’t try to do today what I should have done before. I have written about my views on “Expected Value” before and I can tell you that I have rarely seen a lower expected value for the stock market.

It’s tough to close a winner, it’s tough when you close a winner and it heads higher, and it’s easy to close out a loser. But we don’t get abnormally high returns being successful at the easy stuff. Most of my entire career has been focused on pay for performance and I wouldn’t have it any other way. My least satisfying jobs were compensated with great salaries for easy work. Excessive compensation that has not been earned often gets rescinded. Hopefully you’ll get your money cashed in before it goes away because this market is rewarding everyone for the easy work.

And one more thing… the bulls keep saying how low valuations are on the S&P. Note that my personal investing style has a very significant bias towards value stocks so I’ll be devising some research on this topic as I bake by the ocean. But here’s my contention - when you subtract out energy stocks, the valuations are not so great. And while I have not compiled the data yet, I did take a quick look at the increase in the PE multiples over the past 6 months and it’s not as cheap as it seems. People talk like every stock is in the S&P 500 and the reality is that of the over 3000 stocks I cover that aren’t in there - many, if not most, are valued significantly higher than the benchmark’s PE. As for the S&P though - I plan to show the shifting distribution of the PE’s. My preliminary interpretation is that most of the stocks are centered around the mean and higher. Furthermore, I expect that this distribution has shifted progressively higher over the past few months. What I am trying to say is that as a composite, the average is not that expensive. However it is getting worse and except for a few stocks with extremely low PE’s that are skewing the average, I am not finding too many that are a bargain.

Had enough of my negativity? You’ll be free from my commentary for the next week so I hope that you have a good one without me. The truth hurts. Right now the truth is hurting me because the only real truth that matters is what the market is thinking and doing. And on that count I am not seeing what others are seeing and I am seeing what others are not seeing. Up is Down, Down is Up. Enjoy your week.