Conflicting Signals

Of course, there are almost always conflicting signals in trading -- that's why it is so difficult to do it successfully. But it seems that the signals are more conflicting than usual now. On the negative side are all the economic fundamantals that I have mentioned many times since starting this journal, so I will not repeat them here. On the positive side are several more ephemeral factors: 1) the yield curve has moved from flat/slightly inverted to upward sloping. This usually foreshadows stronger economic growth. 2) Sentiment seems to be midly bearish (though not overwhelmingly so). Its tough to know how many others out there are net shorts, but I certainly don't get the impression either that everyone is heavily long either. 3) Ed Hyman of ISI is calling for higher stock prices, based on moderate GDP growth (no recession) and falling interest rates. Ed is a highly respected economist and knows his stuff. But I wonder if the corporate connnections he usually relies on to guage the economy are poorly suited to predicting a consumer spending induced slowdown.

Despite yesterday's rally, the TSX still remains below my target up-bounce range of 13,550 to 13,900. So I would not be surprised to see some additional upside from here. But as I keep mentioning, it is important to stay on one's toes and not get wedded to one side or the other.

MARKET POSITION: SHORT (4 units)