This isn't the making of another bull market, but when you look at the depth of the crash last year, you realize that any evidence of the economy stabilizing and leaving behind a "bottom" removes fear of re-entering the market. I have friends who lost a lot of money in the crash, cashed out, and just a few weeks ago started talking about investing some money back into the market. Their fear was gone and they saw the market going up and the new fear was that they would miss the train. One couple wanted to invest in a particular set of companies because they believed these companies would grow in the future. They wanted to invest for the long term (10 years) and had no idea where the current stock price was in relation to anything. All they cared about was that they believe these were the companies that would grow nicely in the next 10 years. One company was AMZN. I reviewed the chart at the time and saw that AMZN was almost back to its 52-week high and actually wasn't all that far from its all time high. Now this couple did not want to lose any more money in the market. So I explained to them that AMZN was currently overextended in its trend and they should wait and see what the stock did when price moved back to the 78.00 area. If they bought in there, I told them, they would be getting a value price and could place a stop loss at a reasonable level. The point is that people now have more fear of missing the train than of the market crashing again. My friends were ready to jump in at any price. Money is coming back into the market. Longer term investors (institutional investors) are driving price forward. If the greed continues, the market could move significantly higher despite unemployment issues, commercial real estate issues, lack of revenue growth triggers, etc. Greed could drive prices much higher than current levels; markets are irrational because of greed and fear. If you kept thinking last fall that prices couldn't possibly go any lower as they continued to do so day after day, and now find yourself thinking there's no catalyst to drive prices higher, think again.
and also the debt they carry on the cards they still do have is being charged interest at rates that are borderline criminal. not exactly enticing people to go out and spend. the credit industry creates mistrust and fear long term doing this. even if they lower interest people will be leary about using their credit for fear of randomly raised rates. of course we can only buy with cash instead but who has that much disposable income? those that do are probably using it investing in bargains (financial) for future gains...not consumer spending. maybe this bull rally is this exactly. consumers turned investors.
It may or may not be the start of the new bull market (a new bull market may not be that many months away if this is a bear market rally). People do feel the worst is behind us. That at a minimum our financial markets are not going to collapse and most likely the market lows have been put in. The institutions are afraid of missing out on market gains and looking like fools. That is whythey keep talking up market corrections and "hoping they occur so they can get invested at a lower price. Considerable money is still on the sidelines. Their fear is showing up on the days the market is rising and the vix is going up in tandem. The individual investor needs to recoup his losses in his retirement plans. They are beginning to feel comfortable again in riding the ups and downs. The market started falling 4th quarter of 2007 in anticipation of the 2008 and 2009 economies. It is now in the early phase of anticipating 2010 and 2011. The March prices were most likely seriously deflated. In looking at today's market prices, we are only at January 2009 prices. Over the next 18 months there could be a ton of upside.Sure there will be retracements but not as bad as we have seen. The trader has developed a short side bias. Stocks fall faster and yield greater profits on the down side. The bias on this forum is down. Look at the ops handle.
You nailed it. Every time bad news or a lowered target price hits and a stock gaps down, the gap tends to fill pretty quickly. Look at POT; every dip into the 80.00's and the buyers pile in as if the sale ends Friday. They're looking at the "blockbuster 2010" projections and any price below 100.00 is a bargain. AMZN and MSFT disappoint, but not enough to make a dent in the up trends. BIDU falls to the 320's in after hours Thursday, then gaps up Friday and rises over $20/share despite S&P issuing a "strong sell" opinion Friday morning. (OK, short squeeze, right?) I've had a short bias for some time because price falls so much more quickly and I'm an ADD day trader, but I have IRA cash on the sidelines and I've been looking for stocks to buy on the dips, or stocks that have been consolidating and due for a breakout on any hint of economic growth (shippers, for instance).
I wouldn't step in front of this train. I believe the money that's coming into the market now is from investors. I don't think these people are looking to turn around and sell or short the market.
"People do feel the worst is behind us." I like that. Depends who you talk to. The people who feel the worst is behind us are the first wave of people who got hit the hardest. If you walked away from your house, or bk or closed their business, whatever faux financial relief, their cares and worries are over. Of course the worse is behind them. You can write them off from an economic perspective. Imo, there's a greater number of people who might believe this is as good as it gets. Hence the people with available money and credit aren't making a move. People with money don't believe anything coming out of the media. People with money have eyes and ears of their own, had money in the market and imo unlikely going to be sucked back into "investing" when their retirement is underwater and KNOW sumbody has to pay the piper. But who?
SPY In A Week +5% 13 37.14% +2% 4 11.43% Flat 8 22.86% -2% 6 17.14% -5% 4 11.43% Total: 35 votes 100% as of 7/26/09 6:30pm +5%
Well we know the number one driver of the market is inflation, and real inflation is much higher than the government figures, so is the market just discounting the future? So i'm still biased long but i did put on a couple of selective bear diagonals this past week with the long legs deep itm and expiring in Dec and Jan. Should i have bought farther out still? We do have a dark cloud of resistance looming overhead. Are we just too giddy to notice? I guess we'll have to wait and see.. For anyone tempted to do the same, don't! I am inflicted with a chronic disease: tooearlyitis.