It wouldn’t be right if I didn’t own up to being wrong about my last couple of forecasts. Plus, how could I bash the experts if I hypocritically excluded my own faults? So, let me highlight my mistakes:

1. About a month ago I predicted the market would quickly take a turn for the worse. The market did just the opposite, and is now close to making up it’s first quarter losses.

2. The past few weeks I predicted corporate profits would tumble. While earnings were mixed and lower than last year’s results, earnings came through much better than I expected.

3. At the beginning of last year I celebrated being “back in black“, but now I’m back in the red after this past month’s comeback.

Three bad calls.

Now call me crazy, but I still don’t think my forecast is wrong on the economy and where the stock market’s headed. I believe it’s only my “timing” that’s incorrect. I’m still of the opinion that the stock market’s headed south, and I’m still 100% in cash.

I’ve been invested in cash for a while now. Time will tell if I’m correct.. or just plain crazy. So, stick around to find out. Until then, I think the following music video best describes my feelings about this past month.

I won’t repost results that you can find elsewhere, but suffice it to say, the market really made a comeback in spite of worsening economic data. Here’s a list of some good places to follow weekly market results:

• Briefing.com: Weekly Wrap
• Vanguard.com: Economic Week in Review
• CNBC.com, By The Numbers: Market 360

There’s an old adage that says the market usually turns around before the economy. A lot of folks are now saying that all the bad news has already been factored in, and that the market has bottomed-out. Well, I’m a little skeptical. I still think that the market’s in for more bad news and lower price levels. Corporate profits are going to be hit hard soon, and profits are what drives stock prices. Let’s see if the PPT can manipulate that.

But, don’t just take my word for it. Listen in to what Standard & Poor’s Equity Research has forecast for the remainder of the year and decide for yourself:

Earnings Outlook: Rebound or Repeat? (mp3 audio)

So, I’m still waiting on the sidelines, 100% of my retirement holdings invested in cash. Only time will tell if I’ll be left behind, or if my continued patience eventually pays off.

Hedge funds control large amounts of money and don’t have the limiting rules of mutual funds. They can move quickly in and out of investments of their choice. But, hedge funds must provide returns much better than mutual fund returns in order to justify their costs (and jobs).

There’s extreme competition between the many hedge funds to capitalize on certain technical readings. This is just my speculative opinion, but now that the market has turned south, there’s high anxiety on their part NOT to show losses (oops.. I mean negative growth). The more the fundies compete to be the “first in” or “first out”, the higher the volatility.

So, as long as this happens, I’m expecting more volatility.

When I made my decision to move my retirement portfolio into cash a little less than two years ago, I jumped the gun and got out too soon. If I’d have waited just a few months, I could have gotten out at a higher level. But, you know what they say.. hindsight is 20-20.

Regardless, it turned out that I’m ahead of the game now because I stuck to my guns in my belief of the recession-predictive qualities of the inverted yield curve theory, which states that a recession will occur within 2-6 quarters after the occurrence of an inverted yield curve. So far, this prediction is becoming reality. We’ll only “know” retrospectively.

The good thing is that I’ve learned my lesson about jumping the gun too soon. Now, that I’m back in the black, I’ve been itching to get back in the stock market, but only because of fear that I may be left out if I made the wrong choice.

This fear is powerful, but I’m trying to remain on course until everyone else realizes that we’ve entered a recession, and the stock market falls even further. Between this week and the next few months, I believe investors will come to that realization, and at that time I’ll make my move.

Although I’m tempted to get back in right now, I just have to keep in mind…

A lot of day traders have been successful using technical analysis when buying or selling stocks. I’ve even read of major fundamental analysts successfully incorporating technical analysis as a efficient way to time an entry or exit into a stock. I’ve even referred to Barchart.com’s technical opinion section myself before entering a few positions.

So while I’m not a big proponent of it’s use, technical analysis does seem to hold some value. However, like all other forms of individual stock analysis, technical analysis is subjective and open to individual biases.

So what’s my point?

I have a dream for this week. Okay, okay, bad holiday joke.

Seriously, I’m actually really stoked to see where the market will lead us this week. I can’t help but feel that the market will continue on it’s downtrend as people further realize that the economy is in dire straits.

But, a weekend review of the stock market blogs (check out my blogroll) and other financial websites leaves me with the feeling that I could be wrong, and that we may be in for a near-term bounce.

Many of the technical traders have been referring to a market that has been “oversold”. According to many of these technical analysts, the stock market is due for a rebound, in spite of other factors and what’s been happening this month. Some have actually posted opinions that this may just be the time to “go long”.

These type of polar opinions are what really makes me excited about the stock market this upcoming week, and I can’t wait to see what happens. I’m hoping we’ll set new lows. C’mon tuesday!

Perception plays a BIG role in the stock market and it seems investors have come to terms with the “R” word and are fleeing to (what’s now considered) safer investments.

But, this is all great news for bears (like me) who’ve been forecasting a recession for months now and have been sitting on the sidelines fully invested in cash (VMMXX).

With just a little foresight and an abundance of patience, the market-timing risk that I took with my retirement portfolio has finally come to fruition.

After todays market plunge, I’m “back in black” and expecting more.