Window Dressing Or Real Buying?

Just when we thought there might be some sort of real correction (at least more than the 2-3% variety), the buyers came in today on basically no news.  There was some M&A activity with Xerox & Johnson & Johnson.  In addition, there was some upgrades in the tech sector which I continue to like, especially the chips.

Stocks opened higher and never looked back.  There was buying in several sectors including REITs, small caps, technology, emerging markets, etc.  We’re approaching the end of the quarter and we know there is typically some shuffling around to make portfolios look better.  Window dressing, as it’s typically called, is when portfolio managers buy and/or sell positions to make their holdings look better than they have throughout the quarter.  For example, Apple (AAPL) & Goldman Sachs (GS) have done great this quarter.  If I was a mutual fund manager and didn’t own these two, I could run out and buy them now and get them on the books for the end of the quarter so when you get your statement, you’d see these as holdings.  Naturally, you’d assume they were owned for some time.  You don’t get to see the transactions, just the holdings.  Thursday is the beginning of the 4th quarter and we need to see if that brings in some real selling or not.

Today’s rally was still impressive whether it was window dressing or not.  About 86% of the volume today was upside volume on the NYSE.  But, the overall volume was low.  So, while the quality was good, there still seems to be a lot of people watching from the sidelines.  One way we’ll know that this rally since March 9th is ending is to see what we call a blow off top.  That’s when the charts go straight up and the volume increases dramatically.  That hasn’t happened yet which leads me to believe there is still more conversion that’s yet to take place.  When I say conversion I mean naysayers turning into investors and buying.  Even though the rally was weak from a volume standpoint, it was impressive enough to make bears very concerned and scared.  What if the big correction was only a few percent and a few days?  Uh oh.  Uh oh if you’re not invested.

The Sugar High Continues

A few weeks ago, the chief investment officer, Mohammed Al-Arian commented on CNBC that what we’re seeing in the market right now is a “sugar high”.  First of all, this is a bond guy commenting on the stock market which he’s free to do.  But, what many fail to realize is that a “sugar high” can make you a lot of money.  I’ve equated to all the stimulus as a steroid shot.  My son had a RSV when he was little and they gave him a steroid shot.  He perked right up and felt great on the way home.  I was amazed.  Now, we know you can’t keep giving him steroid shots for the rest of his life.  It would eventually kill him.  But, for the short-term, it did wonders to make him feel better.  That’s what all the printing of money has done to the economy.  It’s the steroid shot.  Bad long-term repercussions, but great in the short run and great for stock prices.

Speaking of sugar, my sugar high continues.  I’ve mentioned owning sugar the last several weeks due to the demand/supply imbalance.  More consumers consuming sugar, a drought in one place and too much rain in another where it’s produced means higher prices.  Recent reports suggest it could still triple from these lofty levels.  I own the iPath UBS Sugar Index ETN (SGG).

Screen shot 2009-09-28 at 4.45.47 PM

You can see from the chart above that it’s been a great trade.  After a huge move up in August, it had the correction it needed in early September and held right at the 50-day moving average.  This ETF has plenty of room to run not only due to the technicals, but more importantly the fundamentals which remain excellent.

2 Responses to “Window Dressing Or Real Buying?”

  1. 1 David Reeves September 29, 2009 at 1:28 pm

    Hi Karl,

    I really enjoy your show, 1110 am (Houston) and your podcast. My broker told me last week that he was concerned about further declines in the dollar versus other currencies in addition to future inflationary pressures. Today I read an article by Liz Ann Sonders ( in which presents an argument that the dollar may be set to ralley. Which side are you on – I listen tomorrow for your answer.



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