This is What I'm Thinking Here

One of the best parts about having a blog for 3 years running is that I can always go back and see what I was thinking and when I was thinking it. I get a lot of emails and comments thanking me for everything I share and I love getting that great feedback. Truthfully, there are also some selfish factors in keeping the blog up. It holds me accountable. And I think it's healthy to put ideas on paper.

So here's what's going through my head these days:

First US Stocks. I think we head a lot lower. There's no question. I think you can fade any rallies above 1800 in $SPX. If we start to close on a weekly basis above 1810, then I would reevaluate that thesis. But it definitely looks we'll drop below 1700. The reasons are pretty simple: January historically one of the best times of the year. For me, it's when the market doesn't follow seasonal trends that we should pay attention.

Also 2014 shouldn't be a good year based on a lot of cycles that we look at. The mid-term election years are historically the worst of the 4-year presidential cycle. The Decennial cycle doesn't tell us much, but the 5th year is historically the best - 2015 fits in that category. So I can see us stalling out this year to set the market up for a monster 2015. From a secular perspective, it would seem normal to see another cyclical decline before the next secular bull begins. Time-wise that would make the most sense.

Bonds started the year out great. No one wanted anything to do with them coming into the year, and I'm still not seeing them getting the attention they deserve. Looks to me like bonds are still heading higher as rates continue to fall. Last month some lady asked me if I was losing my mind for being bullish bonds. On Business News Network a few weeks ago, they asked me I was feeling okay for liking bonds. Sentiment is all around us folks...

As far as this emerging markets mess, I think there's probably more downside to come. Looking for at least another 8% of downside in $EEM - it won't be straight down, but those 2011 closing lows are screaming at us.

Utilities and REITs should continue to outperform S&Ps as money looking for yield flows in that direction while rates keep falling. Meanwhile I think consumer discretionaries will keep getting hurt. One of the market leaders since the 2009 bottom, this sector should continue to struggle this year with Retailers and Homebuilders dragging down the space.

In commodities I see a lot of potential. Look at Corn and Coffee, two areas that can see huge rallies in the first quarter. I've loved Natural Gas for a few months now, but it's not for me right here. I expect this volatility to continue and I will be on the sidelines and reevaluate down the road.

Twitter and Facebook look like they want to head higher. I'm seeing a lot of strength there both on an absolute and relative basis. I cannot hate on these guys.

I think the biggest problem I see out there is in Japan. We're talking about a market that was up 50% last year. They went out at new highs and have been getting crushed throughout January. If this market cannot get back above those December highs, Japan is in trouble. And I'm referring to both the Nikkei and USD/JPY which are obviously very highly correlated. There is a long way down in this guys.

And that's what I'm losing sleep over these days.

What are you thinking here?

Tags: $USDJPY $DXJ $NKD_F $XRT $XHB $XLY $SPY $TLT $TNX $TWTR $FB $UNG $NG_F