A Contrarian Position, Being Long

After 12 to 14 months down , a bear attitude has finally engulfed the stock market.  For the first time in this whole period  we have seen this attitude personified by aggressive selling on rallys and even CNBC has guests who say this is a bear market. That is good, it is time. 

This bear attitude has been very noticeable since about three weeks ago on 8/11. While this is a somewhat contrarian view, we at the moment see the markets as building a base for a significant bounce rally.  The biggest potential is in the financial sector which could see rallys approaching 20 % from this area. The S&P and Nasdaq have less potential due to pressure from oil and consumer stocks, but could see 5 to 7 percent rallys from here. How one handles this rally is up to the investor.  No doubt the safest, least anxiety approach would be to sit in cash and wait for it and then get short.  With our view that the subsequent next leg down will go to the 1100 area on the S&P there is a significant risk on the downside if we are wrong. We remain 85 percent long in our portfolio.

6:03 AM CDT

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