So, at what level in the S&P will it be it too risky to be long? If you can't answer that question, you're nothing but a Monday morning quarterback. I need a forecaster!
I read on trim tab that the incidence of people not paying their mortgage is so high now that it translates to a 2% increase in income. No wonder people have more money to spend if you take the housing payment out of the equation. I know from local anecdotal evidence that people who have stopped making their housing payments are still going out to eat! What a country! FWIW I missed most of the rally and had my hat handed to me in July trying to pick the top. I wised up and have been heavily long via OTM call options on everything from NQ futures (800 calls) to ENER, even NG calls are starting to go green for goodness sakes! I have made more money in the last week (since the 990s, when we broke above 1002 is when I really just started buying everything in sight) than in any other week since I started trading. Vix looks like it is going to collapse here and major volume coming to confirm the double top break in the SP. Yes I know the government lies (which is why I bought 55 ES on the retrace last night secure in the knowledge that the numbers this am were going to be good) and main street is still reeling but doesn't seem to have anything to do with market action so just ignore it and play the momentum which looks like it is about to go parabolic here as the big shorts who still haven't covered who were shorting the 138 level capitulate, the blowoff top on heavy volume should act as a tell as well as a divergence on the SOX (which so far has been acting great and confirming the moves higher) as far as when to exit before you give too much back and we should hit 1100 before the end of the month on this blow off phase, certainly before the end of the year. Big fund managers went away for vacations and come back to find they are behind and need to play catch up. Their performance anxiety will fuel the next powerful push higher and there will be lots of leverage involved. This rally is fueled by money that is coming from the treasury and money that you and I and those who pay taxes will have to pay for on the back end so you may as well get some of it here and now on the front end. That and the weak dollar (probably what is causing the weak dollar along with the realization that growth rates in the US are going to be weak relative o the rest of the world for a while now while issuance of debt is going to be greater relative to the rest of the world) but, the EUR is one of the few things I neglected to go long but just look at it ramp as the dollar crashes adding the fuel to this USD asset appreciation blaze. Bears will have their day again as I still believe this is a bear market rally but watch for the blow off before you get short this monster, and vix back in the low teens at least. Kudos to Noddyboy, one of the few on ET (of the credible posters) who has been on the right side of this for a long time now.
BigPipn, I'm having trouble buying into your argument. While it's not true that banks can't lend; they can, and they have plenty to lend, it is true that lending by banks has slowed to a crawl as the number of qualified borrowers asking for loans has decreased because of the recession. Remember. there are thousands of banks, and only a few hundred, or less, in trouble. This is serious, but let's keep it in perspective. But why are you discounting the other mechanism, besides bank lending, by which the money supply can be expanded, i.e., government borrowing and spending coupled with monetization of debt via the Fed? Isn't this the route that all debtor nations in trouble have taken in modern times? Doesn't this monetizing, by definition, lead to inflation rather than deflation? As private business has leveraged down, the government has leveraged up. Won't this prevent significant deflation in the overall economy, and run the risk of excessive inflation, particularly once employment increases? But even if employment were to remain in double digits for a long time, shouldn't we still avoid deflation, simply because one destination for borrowed government money is the unemployed? I'm really having trouble buying into your argument for deflation.
This is the trading forum, none of that econ. mumbo jumbo will make you a dime in the markets right now. FWIW anyone who thinks we are in an inflationary environment after the consumer credit number is pretty much hopeless. Don't confuse USD weakness for inflation. Banks are lending but not to those who need it on main street. They are buying massive amounts of Ginnies as they can hold them on the books as very low risk assets, trouble is they are doing this with short term money and exposing themselves to huge interest rate risk. Its free money with a very low risk profile (important that it look so right now) for now at least.
I'm in the Prechter and Dent camp, yes. Right now asset prices are being fixed by the gov't. Many will agree that stocks are manipulated now but let's pretend they aren't because we cannot be sure. WE did fall A LONG way and companies are producing huge margins with a 10-15% reduction in labor costs. As far real estate... Sure the starter homes are finding a bit of a bid (from my generation 23-35 year olds) but the McMansion values are cascading. These houses are usually purchased after the kids are on their own and as the couple is coming over the hill towards retirement. There is very little demand for these houses. To add fuel to the fire, the banks aren't even moving forward with the vast majority of their foreclosures. They can't because if they were to move forward and eventually sell the house (at foreclosure pricing) they would take a HUGE loss because the house will have been vacated and more than likely not in tip top shape. We've just seen the biggest boom in the history of the world conclude. Bubbles are good for an economy because they allow for extra capital to flow into the hands of knowledgeable under-funded entrepreneurs to make things happen. This is only the beginning. This latest rally from March to now is a counter-trend move. Is it going to 1050? 1100? 1300? 1500? I don't have a clue. Anyone who tells you any differently is being disingenuous. There is undoubtedly a major manipulative position in gold and in the bond market. When/if these positions are lifted and what their ramifications will have on the economy are unknown. I do know that the gov't cannot stop the deflation that is coming. We will not see another boom like this until the mid 2020s. The last 25 years have been amazing. The leverage was tremendous, the bonuses were astronomical. The outright theft that has and is still going on will likely be swept under the rug because we are too busy discussing inflation/deflation while they are busy finding ways to legally steal OUR money.
Eur/Usd can go to 1.75 but that won't save stock prices or real estate here. Even with possible manipulation, this is THE BEST we can hope for. We just saw the consumer credit #s, there is a comparative point for you. Scary isn't it?