The smart money is ready for Dow 16,000

While regular investors are worried about the Fed's stimulus tapering, the professionals are moving in.

By Anthony Mirhaydari Jul 9, 2013 3:14PM

copyright Tom Grill, CorbisThe markets have been spasming since Federal Reserve chairman Ben Bernanke started talking up the possibility that the Fed's $85 billion-a-month bond purchase program could be rolled back later this year. Bonds and commodities were hammered. Interest rates surged. And stocks fell into a three-month-long downtrend.

 

That's all ending now with small cap stocks, represented by the Russell 2000 iShares (IWM), already pushing out to new all-time highs.

 

Once again, the smart money was one step ahead. And now, with the Dow Jones Industrial Average less than 100 points from setting new all-time closing records, insiders are locked and loaded for a run at the 16,000 level. Here's why.

 

Analysts out of Barclays' London office pointed out this disparity between retail and institutional fund flows in a note to clients this morning. Professionals have been steadily pulling money out of money market accounts (essentially cash) since talk of Fed tapering emerged in late May. This, in their opinion, reflects "growing optimism among non-financial firms about the economic outlook and a willingness to shrink precautionary cash balances."

 

 

In contrast, retail investors have been pulling money out of stocks and bonds and increasing their money fund balances. You can see this relationship in the chart above, which shows fund flows after Bernanke's Congressional testimony appearance on May 22.

 

As for specifics, retail money fund balances have increased 5% or nearly $30 billion while institutional balances are down 2.3% or $22 billion over the same period.

 

 

There is other evidence the smart money has been quietly preparing for another run at new all-time highs. Options traders are building their bullish bets as call option activity increases. Commercial hedgers in the equity futures market are covering their net short positioning. And the relationship between stocks and bonds suggests money is transitioning into equities.

 

For the run higher, I'm concentrating on the energy sector. In the Edge Letter Sample Portfolio, I have exposure to crude via the ProShares Ultra Crude (UCO), which is up 8.2% since July 2. I've also added exposure to small breakout plays like Lifevantage (LFVN), a dietary supplement and beauty products maker that is up 7.4% since July 1. 

 

Disclosure: Anthony has recommended LFVN to his clients.

 

Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​​​​​​​​​​​​​​​​​​​​​​​​​​​​​om​​​​​​​​​​​ and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.


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75Comments
Jul 9, 2013 4:24PM
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He must have multiple personality disorder.

 

Jul 9, 2013 4:33PM
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Anthony, I am speechless.  You're credibility is less than zero.  Do you really think people have forgotten the horrible advise you've been giving for at least the last 9 months?
Jul 9, 2013 4:43PM
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When I read the headline, clicked on it, and read who wrote this, I litterally gasped and nearly fell out of my chair.
Jul 9, 2013 4:48PM
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I've been fairly optomistic about the economy over the past couple of years. But given Anthony's track record, it may be time to sell.
Jul 9, 2013 4:53PM
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You've got to be kidding me.  What an about-face!!

Jul 9, 2013 4:56PM
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This can't be true !!!! .....  It was only a few short months ago that Mirahoodari was predicting

an "Epic Bear " market.  Day after day he profusely produced  charts and graphs to support his convictions with nary a doubt about its validity or probable fruition. Damn fool didn't even have the foresight to hedge his opinion. So much for macroeconomics, heh.

Jul 9, 2013 5:20PM
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I'm getting nervous now. Anthony is bullish. Time to run for the exits!
Jul 9, 2013 5:31PM
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It would appear that Anthony is someone who enjoys writing things that are deliberately provocative and then sits back and enjoys watching people flipping out on these posts.  Why not ignore what he, and anyone else for that matter, says.  Do your own thinking and make your own decisions.  Remember one very important fact: there are no experts here, only those who think they are.
Jul 9, 2013 5:34PM
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he's a fraud just like the market speculators tell you what to look for while they gear up for the mad rush because then they make money from the peasants/ he's part of a pyramid scheme and should be removed from his pulpit
Jul 9, 2013 8:17PM
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MSN needs to overhaul their financial writers.  They've hired a real crack-team of advisers:

Jim Jubak, with his awful JUBAX fund that consistently loses money (even when the market is up).

Tony here, who alternately predicts boom and bust from week to week.

Bill Fleckenstein, the diehard gold bug who declared gold was not a bubble at $1900.  His logic?  Because everyone thinks it's a bubble, it therefore cannot be a bubble.

Truly a brilliant team!
Jul 9, 2013 6:02PM
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This is unbelievable.  He completely changes his opinion with not a mention that the doom and gloom he's been predicting for months has not transpired.  This guy must have some ego to continue to write these columns pretending he knows what he is talking about when he has no credibility.  I think we read this stuff just to get us riled up.  I have a friend who used to say he wished he could buy people for what HE felt they were worth and sell them for what THEY felt they were worth.  If you could do that buying and selling Anthony would be the best investment you could ever make.
Jul 9, 2013 5:37PM
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Never actually typed this until just now: ROFLMFAO. What is beyond insane? That's Tone. And he gets a pay check for this!!! Thank gawd for him, cuz his portfolio is in ruins.
Jul 9, 2013 5:39PM
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CRAZY8s: I`ld faint if you were ever right.Did you ever make it out of grade school?
Jul 9, 2013 6:01PM
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Market didn't go down because of Ben Bernanke's' comments.  It started to go down soon after they Interviewed Mr. Greenspan on national TV advising Mr. Bernanke to start tapering the Bond buy back.  Mr. Greenspan should be in a mental institute and will go down in history as modern americas' architect of the financial meltdown. I don't agree with Anthony. 
Jul 9, 2013 6:35PM
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Smart money ready for Dow 16k'

December 2006 Headline:

Dow 16,000 in ’07

By James Altucher

12/07/06 - 10:38 AM EST

"I’m expecting ther Dow to reach 16,000 by December, 2007"

The dow officially began it’s downward spiral 10/09/2007 [thanks to bwany fwank, D, MA and chris dodd D].

 

 

Jul 9, 2013 7:14PM
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Interesting, amazing, dumbfounding, and...always entertaining.  That's my Tony!  Keep it up laddie!
Jul 9, 2013 6:06PM
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Dow at 16k ? Don't think so !  More like  13k ? That sounds like good advice for the small investor ! TAKE YOUR MONEY AND RUN !
Jul 9, 2013 10:49PM
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Now he's starting to act like Jim Cramer does on occasion.
Jul 9, 2013 7:51PM
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yea? hmmmm, and what about QE 123456789....um how much longer is the stimuli going to go on before its 'pulled back' aka we ran outta other peoples money and printing it no longer is an option.....hmm there's a train wreck a 'comin, in addition to osamacare nightmare, hold on to your azzes people!
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