The fed is doing everything it can to prop up markets - from TAF loans to banks to possibly real estate if they start buying up mortgage books from financial institutions. Bernanke will keep lowering rates if he has to, but he's running out of ammo. People are beginning to post tons of news about the bottom being formed last week. In the end, economic fundamentals will dictate where the market goes, and the fundamentals are still terrible. I'm adding to short positions here. I think we will retest the bottom and fall much further. the risk reward on shorting market around here is great on a technical and fundamental basis. Don't get shaken out!
on a techincal basis the s&p has a lot of resistance around the 1370 level. i dont think there are many catalysts that are going to push the market much higher than that, at least in short term. many catalysts to send it much lower, including bad news coming out of europe - which we really haven't heard much of. the risk/reward on shorting the market here is attractive - all's im sayin
From WSJ. Points out that sustained rally from financials unlikely as most of their revenue streams have been adversely affected. http://online.wsj.com/article/SB120631472377158165.html?mod=hpp_asia_whats_news I regard this as a valid point but not sure the financials are the best shorts out there. Covered most of mine on Fri before BSC takeunder. Note that estimates were lowballed so that they could be beaten and with 50% of revenues from overseas and USD as the reporting currency there was probably a windfall from currency translation in there (have not checked USD levels vs book closing) I see Financials a the first fast wave of a Tsunami with a slow bleed through the real econmoy manifesting in earnings and thus the market as the second slower more destructive wave. Unwinding of the multiplier effect throughout the economy that housing expansion generates plus layoffs against a backdrop of higher mortgage payments.
Historically when the federal reserve pumps as much liquidity into the financial system as recently, the indices scream higher. Once the Fed backstopped the financials, it removed all the remaining pressure on the market. I would not be surprised to see at least a month long move higher as the large shorts unwind their positions.
I am short - but im not nervous. That was the WHOLE point of my post. I'm encouraging other people who are short not to be nervous, b/c i think we're gonna have a fight ahead of us. not to get shaken out when positive pieces come out of cnbc and other crap telling us that we've bottomed and its going to be a shallow recession, if any. that's all crap. i do believe indices can go higher and very well may short term, but i'm going to keep shorting as they do, b/c eventually the market will go where its supposed to. im scaling in b/c i dont know how far up it will go short term before it eventually crashes. im encoraging others not to get shaken out and stay with their convictions if they believe the situation is as bad as i do. if im right, the fed and congress will not be able to stop the eventual plummet the market will take. short term they are a powerful force to push it higher - no doubt.
If Fed cuts could support the market they would have done so in 2000-2 when you had very narrow breadth of stocks with High P/E's and a concept i.e. as the theoretical valuation was all there was, cutting rates should have helped then if they ever could. The market recovered long enough for someone to get a book out claiming Greensenile was a 'Maestro'. Financials may rally as Bill Miller and the Public have not finished doubling up on their losses or urgently "bargain" hunting so as not to miss the recovery that is probably 2 years away.
i agree with most of what you said, but the market is being driven by psychology more than anything right now, and many (wrongly, imo) believe the feds moves can save us from horrible fundamental shifts in the economy. in the long run, the fundamentals will dictate where the market will go. i am not short financials - they have a lot of room to rally. im short indices and some retail stocks. i'm going to short financials if they continue rallying like they did last week.
I agree the rate cuts are supporting the market in the short term through psychology and manipulation thereof with propaganda, but on a 1-2 years timeframe I don't believe they can.