Bush won reelection. The market is happy. Both S&P; 500 and Nasdaq futures are up, signaling an opening surge in stocks.
Does that mean you should get those buy orders in for the opening bell? If you’re looking to make a couple of quick percentage points, sure. If you’re looking to make some bigger gains in a winter rally, I think patience will pay.
Here’s why. If you’re not already positioned in stocks that were cheap in the past month or so, it’s too late to get them cheap now anyway. The sale ahead of the post-election bounce is over. If you did get yourself into some cheap stocks with good upside potential by, say, reading this column frequently, then you have no reason to rush this morning. You’re ready.
If Mr. Bush’s reelection is the starting gun for a winter rally and the market goes up and keeps going up, you’ll have time to get in over the next few days without missing too much of it. Yes, prices will be higher, but they won’t be Googlishly higher in a heartbeat and they won’t be equally higher across all stocks. You’ll have a chance to buy where it’s wisest. Remember, the cheap prices are already gone so you need to resign yourself to buying high and hoping to sell higher.
If instead the market pops the champagne and then realizes after a sip that, oh, what we really have is everything precisely the same as before — and it wasn’t so great — then we might get a new sale before a winter rally. Realmoney.com leans this way, as evidenced by this morning’s headlines and teaser’s:
Gary B. Smith
Rally Runs Out of Room
The Comp hit its downtrend and now seems destined to fall.Jeff Cooper
Watch Market Behavior on a Pullback
The first pullback after the Real Accumulation Week scored last week should be a good buying opportunity.Helene Meisler
Poking Holes in the Bull Case
Various indicators suggest that stocks could see a brief rally after the election, but that’s it.David Merkel
Fade the Election
Neither man changes the fundamental economic problems of the U.S., and stimulus is fading.
Why the sour outlook? Keep in mind that earnings are slowing down. From BusinessWeek:
Rising interest rates, slowing productivity gains, and high commodity prices were widely expected to bite into earnings. But steadily rising crude oil prices combined with a cooling economic recovery have conspired to hit profits harder than expected.
Thus, I suggest taking it slowly. Don’t let the opening pop get under your skin. If you’re not positioned for it right now, you’re going to miss it. There’ll be others. What you don’t want to do is get in line with all the other suckers to buy at the top of the pop, just in time for the morning after to kick in and bring prices down.
You won’t get a clear look at the ballroom until the confetti settles.
