I agree with your general sentiments, but I think the rallies may be more contained now than they were in 2001. Back then people were still in denial, thinking the bubble market would reignite. Now there is a stunning loss of confidence in the Fed and the rest of government, plus everyone is aware there is a serious financial crisis unfolding. Well, everyone but the Fed that is. Today is the first day the VIX has really done anything, but it is setting up for a rally soon, no question.
GDP in *real* terms is 25% higher than 8 yrs ago. In *nominal* terms, its some 50% higher or so. And remember, the stock market is nominally measured. There's HELL OF A LOT more value and earnings in the stock market now than before. This is overdone ... S&P will be at 1800 in 2 years. And thats counting for the Credit default swap DEFAULT event of your lifetime. Money doesn't like stocks now nor houses. Soon it won't like bonds OR gold/oil (no value when yield curve inverts at these levels, and commodities are lousy in a recession). Where to go next? Stocks. I say we test 1250 and be done with this... bottom out for about 3 months, then let the move up begin. comments like yours look smart, but they mark bottoms roughly. (although I don't think we're near bottom... this event needs a little more time to absorb).
I'd love to see a Friday options expiration day mini-crash as capitulation. No one would trust options exp days EVER again.
anyone notice the long term chart of SPX head and shoulders break...anyone who thinks this is a bottom has another thing coming the beginning of resets (which started this CDO/ banking mess) is only in the 3rd or 4th inning while i do agree that 15% off highs is pretty steep....its not the bottom...coupled with the choking sound of middle america trying to juggle 2 jobs, higher prices and a depreciating ATM (aka the house) you have more pain to come the 1.25 in additional rate cuts..buy the time they are cut, hit the system and it absorbs them..will take 1-2 years...as in the rate cut environment of 2002 which lead to run of 04-7 just like daddy Bush.....the next President (probably Bill-ary) will benefit greatly in his 3-4 th year as president by the work of a BUSH who will offer gov't relief as well as an econ stimulus package and lower rates that take time to kick in oh btw....i think BUSH is the biggest moron..so in no way am i a pro-Bush American...he started this mess with abundant spending on nothing (aka Iraq) and pro-OIL stance (choking the middle class ) Ron Paul 2008 d
Traders can make money from this down move... that's cool. But this shows how most investors underperform the market. They all jump off the cliff together. Looking at the big picture, Fed is cutting rates, it's the 4th year of the election cycle. the country is still at full employment. productivity is on a steady climb, the world economy is expanding at the ever fast pace. this down move will turn out to be a great buying opportunity in the long term. we see S&P 1800, Dow 15000 in 2 years.
Call me crazy, but these rallies in futures overnight are the PPT, operating under their proxy: GS. They are tring to stablize the market. Otherwise we would be in a vicious downward spiral a la 1987.
<i>"I agree with your general sentiments, but I think the rallies may be more contained now than they were in 2001."</i> Times are different, no question. I tend to think that increased computerization = black box proliferation may accentuate the squeezes. From what I see, most of the programs kick off at obvious spots on a chart, i.e. classic volatility-breakout fractal measures and key retrace measures. Day after day we see the exact-same turning points, same marks where program-slams kick in, several times per session. What happens when all of these mechanical monsters hit the same orders and/or flip like dominos? Remains to be seen. Keep in mind that short squeeze rallies are violent because they are emotional. It has nothing to do with markets at a bottom, perceived bottom, etc. Short squeeze explosions are all about people sitting on big profits they are afraid to lose. That's the tunnel vision which ignites those rockets every time. When big money is sitting on massive profitable shorts and price action starts edging upward, next week or month be damned. Lock in gains today, deal with tomorrow later. Everyone (but <b>surf</b> himself) will blow out their shorts in spectacular fashion, sooner or later. Then the game resets itself, and begins all over again.