Three Cheers for Dopesickness

On Thursday we saw a continueation of Wednesday's gains. The S*P500 closed up 13.47 points to 1352.07, The Nasdasq was up 44.51 points and closed at 2360.92, while the DOW Industrials gained 108.44 points, closing at 12,378.61. Volume was high, but vastly lower than Wednesday's levels, so this would hardly qualify as any kind of bullish follow through day.
Yesterday's rally was helped along by the news that the White House and Congress have both agreed to provide heroin addicts with free samples of dope to end their withdraw pains...er I mean they are going to give the American consumer some extra money to blow. Tree cheers for stupidity, ready? Hip Hip Horrah!!! Ok, well that was only one cheer, but I'm not all that excited. Between the action that the Fed is undertaking and now congress America is starting to look more and more like a third world emerging market than ever before.
At this point in time we are in a bear market. My only concern with this is that there are a lot of people who now agree with me. The TV stations are dragging out the Prudent Bear Fund (Always bearish no matter what) guy and you are seeing the people who tell you that “In the long term equities always work out” less and less. The crowd is generally wrong, however there can be exceptions to this. Recall the bull market of the late 90's and into early 2000. Everyone knew that equities could do nothing but go up, and do so forever. It ultimatly set people up for heartbreak and loss – but for a certain amount of time the crowd was right, and right in a big way that only massive greed on the part of the crowd can produce. Is it possible that this time we will see the same thing in reverse? I don't know,and I hope not. One thing to keep in mind is that it really is not terrible right now, certainly not as bad as the media and the politicians are making it out to be. If you listen to Hillary Clinton too often you'd be pleased to look out your window and find out that the soup kitchens have not yet arrived in your neighborhood...you must be one of those lucky rich people who makes over $75,000 a year.
The trends overall remain down, and pretty strongly so. Next week the Fed meets again, and they are expected to lower rates half a point again. If they don't produce this rate cut then prepare to batton down the hatches. In a bear market rallies tend to be sudden and swift, often producing large gains. Its interesting to note that 7 of the 10 biggest one day moves in market history have occurred in bear markets.
Currently I think that the best course of action is a cautious one. Ive been 90% to 100% in cash on my client accounts and personal accounts since mid November, and playing with extra caution when I do come out of my bunker. I don't expect that this will change for some time. Yesterday I did buy a small amount of CSX as it broke out of a nice base and continues to show strong EPS growth, though I am a bit worried that Revenue Growth is not keeping up with Earnings, so I will be keeping in on a tight leash. Over the next few days I will also be watching the DXD (Twice Inverse DOW) for a potential entry, but as I have said caution will be my primary stance until I see a change in the market.