Practical market advice—2 scenarios:

I am going to tell you my market thesis. Scenario 1: I suspect we rally a tad in mid July (we are actually doing that now), followed by heavy selling through mid August. That will be when I will aggressively look for entry points into stocks that performed well during the March to June rally, stocks whose prices have corrected substantially. Commodities are an obvious choice, as is technology, a bright, promising sector well along on an almost decade consolidation. A further deployment of stimulus funds, coupled with increased production due to tightened inventories, amongst other short-term positives may drive the expected fall rally to be quite strong and could realistically propel the S&P as high as 1050-1100. At that point, I will sell virtually everything, get short, turn off the computers and relax for the remainder of 2010 and beyond. In a nutshell, this is what I am expecting and I have a reasonably good feeling about this. So, those anxious to make some money back, I would at least consider your strategy along these lines. In mid-August, hopefully after this deeper market correction, I will start to get serious. That’s my plan, just thought I would let you know, it is the type of practical commentary that I shall aim to convey in these newsletters, tangible things that may help you in your personal decisions. Please understand this is just my opinion, and the timeframes indicated are essentially rough guidelines as next week’s action could enhance or violate this thesis. But the general point is this: at some point this summer if the S&P finds itself lower than currently and that’s when I will look to make some purchases.

Scenario 2 (The straight shot thesis): We continue to rally without any major disruption to S&P 1050-1100 and I then get short everything under the sun except for shiny things that can conduct electricity. This possibility will keep me from looking for shorts here. In this case obviously, the rally would occur now and the later fall would be the bloodbath. Markets just seem to be in no-man’s land here. This scenario is as plausible as the first so be wary.