Monday, March 26, 2012

Time To Make Certain Your Stop Losses Are In Place

Here are the headline and lede of a Bloomberg article which cause me to think (from a somewhat contrarian viewpoint) that it's certainly time to have appropriate stop losses in place in the event hedge fund managers have it wrong (once again).  The hedge fund buying activity over the past several months has set the stage for the much anticipated 3-5% near-term correction.  (See my prior posts regarding the potential of a market correction.)  As Bruce McCain, chief investment strategist at the $20 billion private-banking unit of KeyCorp in Cleveland, said in a March 22nd Bloomberg interview, “There should be a pullback, there’s been just too much enthusiasm.  One of the last parts of the rally is when people throw in the towel and buy into it, and there is that risk for the hedge funds right now.” 

Bloomberg article, March 26, 2012 ---
Hedge Funds Capitulating, Buy Most Stocks Since 2010
Hedge funds trailing the Standard & Poor’s 500 (SPX) Index for the last five months are giving up on bearish bets and buying stocks at the fastest rate in two years.

See the whole article by Nikolaj Gammeltoft and Whitney Kisling here ---