The stock market has been up in 12 of the last 14 days with no real good news to justify the move. The S&P is above 1300 for the first time since July and the market appears overbought to me.
We have a crisis in Europe brewing that will start to unravel in the next couple months.
As much as I would like to start selling stocks now, I have a strong inclination to wait a couple more weeks. With the S&P running into little technical resistance, it is unclear how high the market will go before Europe takes it down again.
I am willing to take my chances for a couple more weeks.
I am predicting the stock market will crash in late March or early April as investors come to grips with reality once Europe's first quarter GDP numbers are released. I think the S&P will start a drop that will bottom between 1050 and 1100.
The only thing that can prevent this from happening is Barack Obama and Ben Bernanke. With this being an election year, the White House will be on a short lease with any market dips. I think QE3 will take effect at the first sign of trouble.
This puts everyone in a terrible quandary. This should be a perfect time to sell and buy later at a more opportune time. However, with the threat of QE3 lingering over us, it is possible the market could go continue its unsustainable trend and approach 1500 in the coming months.
A speculative play would be to buy gold now when it is still reasonably priced because gold will go up if QE3 is announced and implemented.
Time will tell if Europe will blow up and Bernanke will implement QE3, but now is the time to be overly cautious as we enter into this critical juncture.
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