1. The market is not overvalued (as measured by the fed model), the yield curve is not inverted, and deflation isn't on the horizon. 2. Sentiment has gotten very, very negative as measured by Rydex flows, various sentiment polls, and ISEE call/put data (all of these very representative samples). The public has been scared out of this market to a very large extent. 3. The fed will be cutting rates, regardless of all the chatter about the minutes being too hawkish. 4. The decline in the dollar has been orderly and there has never been anything that I am aware of correlating dollar weakness to bear markets. 5. It will not be different this time (sorry Cramer). Look for Resolution Trust Jr or something similar to save the US banking industry (it is what I would call too big to fail, I suppose). I am looking for and positioned for a rally that takes the market higher into the end of the year. Just my 2 cents.
This should not be in news. But. You may be right but the market is not saying you are. Just volitile sideways action is all I see, not your typical bottom.
Fair enough, I am still getting acquainted with the ET boards. I was inspired to post my reaction to what I have been hearing in the news in regards to Bernake, our date with a recession and the death of the dollar, and how it all may not mean what people think in terms of the market from these levels.
They say on CNBC that housing is 5% of the market NOW. When the market was moving up in 2004 to 2006 the power behind the market was housing and employment, basically the consumer. Housing is directly maybe 5% of the market, but the consumer is 70% of GDP and housing is 80% of consumer (say), so if consumer falls to 60% will exports pick this fall of GDP... So housing is going, going...employment... is on the verge.. BUY STOCKS IF YOU BET THE CONSUMER WILL BE UN DAMAGED BY CURRENT WOES. THE BIGGEST INDICATOR IS THE UN-EMPOYEMENT INSURANCE CLAIMS.. CANARY in the coal mine is Xmas 2008 retail sales... If this spikes up ..game over...
However, there are signs that 1) Christmas will be weaker for many retailers because spending is decreasing due to 2) tightening on equity loans and 3) foreign capital is leaving the country and 4) inflationary beginnings (according the Bernanke's definition). I believe the market is watching all of these with its finger on the trigger, i.e. signs of inflation, poor seasonal earnings and decreased foreign capital investment will lead to a correction. However, if everything goes perfectly smoothly then we'll have a nice sideways market while everyone continues the watching and waiting...
I see the same things guys and it scares the hell out of me to be leveraged long in a market like this. However, having the hell scared out of me isn't something I can quantify and backtest. The same can be said for projections based on what I am hearing on CNBC regarding the death of the consumer etc. I have however, been able to quantify and backtest things like extreme sentiment ratios and extreme price action. Along with the fact we are seeing none of the signs that preceeded past bear markets (an inverted yield curve, sky-high valuations, deflation) the odds say this is a correction, not a bear market. That said, I am very worried we are going to take out the August lows and this will turn into a primary bear market, and in that case I will be wrong and out. Just curious, is anyone reading this post buying the equities at these levels?
you can quote and analyse all you want, but the market is based on perception,not reality. in fact there is no such thing if i say black is white, white is black, these are just concepts. if i put a white dot against a white wall, can you define white? hope u understand
I agree with the negative sentiment stuff, but it has been that way for a couple weeks now. All the ingredients are there for a bottom except the most important one - buyers. If my data is correct, we have had one day in the last 10 trading days with positive breadth and volume. Short covers like late yesterday that immediately fall apart overnight (see Nov 8-9 also) don't exactly inspire confidence that a meaningful bottom has been formed.
11/21... Not true about Rydex Ratios... still very close to "market peak" kind of numbers. There might be some bearish talk, but if sentiment is measured by how much money has been committed to the dark side, you'd have to conclude that the market is still complacently bullish.