On the Intermediate Term there simply is no doubt that the equity markets are in trouble and a decline is definitely brewing. This is exactly why I have hedged my stock positions.
However, for Long Term Investors this decline will offer a chance to put to use any cash that might be laying around and buy good quality stocks.
I am Ultra Bullish on the Long Term and there are several reasons, but one of the major reasons is characterized in the chart below.
As you know, the most prudent thing we can do and especially in the equity markets, is to follow in the foot steps of the commercial money and do the complete opposite of the average Joe or small speculator.
The chart below shows the red line (Average Joe) at its most bearish in years. Small speculators are very nervous and this bodes very well for the long term vitality of the stock market.
Even more impressive is the Blue Line (Commercial Traders) or the smart money. The Smart Money is Currently more bullish than they were at the March 2003 Secular Low! As a matter of fact, they are the most bullish they have been in over 10 Years!! This in a market that has had quite a rally already.
So it is very plain to see that on the Intermediate Term, Caution is warranted. However on a Long Term Basis, Stocks remain Historically cheap and the Big Boys know it. This market Long Term has the potential to double over the next 18 months!! WOW!! People have been waiting for the time when our domestic markets would start to perform as well as some of the foreign markets and it looks like over the next 2-3 years, that time will be here!
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