Bulls 4, Bears 0. Will Earnings and Full Moon Help Bears?

we need to hear more from the bulls on their case. personally, i find it hard to be bullish after i see SPY going up 13% in 1.5 month. historically it should go up less than 10% per year. the giant advance during 2009 is understandable given the huge prior drop, but it has been a year since the bottom and we are overdue to some "normal" rates of return in the market.

 

Well the worst case scenario for a trader is the flatline low volatility market ala Jan 2004 thru june 06. I lost money then because my trading style requires a little volatility. I quit trading for awhile after that stretch and didn't return until 07.

So keep those boom bust cycles going Bennie Obama's Boy Bubble Blower.

 

this market can't be shorted successfully if one waits for the trend to change. e.g. in Sep and Oct one could have squeezed a couple of %s, but had to be nimble to exit his shorts because the downturns lasted only ~1-2 weeks and were shallow. in Dec one got chopped for a month. only Jan-Feb gave a decent downtrend. Even then, one could have missed a lot of the down move is he waited for confirmations of the downtrend.

it appears that if one is really good at anticipating the turning points, he could have made money shorting this market. but one has to be really good or really lucky.

 

Last week bears made the strongest showing. Thur intraday reversal must have trapped a bunch of longs. Surely, they hope to get out with minimal damage "once the market retests the highs". Good luck with that line of thinking.

Still, there are too many bears around for my taste and the downside maybe limited as well. Range trading (barring some major news)?

Looking on the bright side, we do have a quite a few hopeful bulls...

I just wish I were an experience bear like in this joke:

There's two bears standing on top of a mountain. The younger one says to the older one: "Hey pop, let's say we run down there and f*k one of them cows". The older one says: "No son. Lets walk down and f*k 'em all".

 

Hello Shortie,

Before I reply, thanks for posting your analysis and comments on the possible shorts. It does give us all something to think about.

When I read your reply I actually think you and I are saying the same thing. We are currently in a strong up trend. If you and I try and short in this strong up trend you said “downturns lasted only ~1-2 weeks and were shallow.” And the object of trading is to first minimize loses. So, I see shorts in this environment as a higher than average risk for my discretionary swing trades.

It’s simple. I don’t short in strong up trends with my discretionary trades (however my automation trades both sides up or down). So, all my discretionary swing trades have longs for the last year. The longs have been too good to even consider swing trading shorts. Why put on that kind of extra risk with Uncle Sam footing the bill?

And I agree with you last statement “it appears that if one is really good at anticipating the turning points, he could have made money shorting this market. but one has to be really good or really lucky.” So I stick to the longs.

 

i agree, looking back all one sees is the unstoppable uptrend. but looking forward, i have hard time imagining the uptrend to continue with the same slope.

SPY is ~7-8% higher than at the end of Oct-2009 earning season. are earnings gonna be that much better to warrant ~15%/year growth in SPY? to me that's already pretty optimistic but it is possible we will get the earnings good enough to warrant the high price of SPY. could we get such great earnings that SPY will go much higher from here in the next 1-2 months? Unlikely me thinks.

and we are not even in the earnings season YET. there is uncertainty about the exact earnings (and they always can come out total crap). What I am saying is that SPY may be priced close to the optimistic perfection right now and any doubts about earning will quickly send it lower, even if temporarily.

 

i could be wrong about the earning potential according to GS:

"Goldman's S&P forecast summary:

Our top-down EPS forecasts of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Our pre-provision and write-down EPS forecasts are $81 for 2010 and $91 for 2011. Bottom-up consensus forecasts a 38% increase in 2010 to $79, and a 20% increase in 2011 to $95.

..."
http://www.zerohedge.com/article/weekly-chartology-6

 

I think we will see trading range for next week. Note also that Friday is a holiday so it's a short week.

Beyond that, and as to whether we're at "THE top" etc. - no idea whatsoever.

 

Hello Shortie,

I read your analysis this morning. It all makes sense. I have to agree with you. I’m of the same opinion you are. What you said makes perfect sense. I also believe that company earnings cannot maintain this pace of growth, it is just not possible. Likewise you said there is probably too much irrational exuberance in SPY.

Then I pick up the weekend journal at breakfast and ATT is taking a $1 Billion Obamacare care charge along with a host of others. Talk about earnings crumbling. Then there is the rising dollar that is going to hit mult-nationals like Coke (KO) and McDonalds (MCD) with their big overseas operations. All this pumped me to think short.

So, I had a long talk with my boss (the plan) about going short. Boy did I get screamed at. He reminded me of how I thought the market was going down big in March of 2003 and I went short with big losses. I was told “…are you going to abandon us again for some stupid opinion….” So I wish you good luck with your shorts. And I probably will take a string of losses with my long swing trades. But the boss (the plan) has been real good to me since I listened to him. I just can’t take shorts until he tells me to. Thanks again.

 

I am bearish and bullish.