Maybe A Correction Isn't Coming?

This is the mentality of about 98% of the strategists, money managers etc etc out there, they believe this market can only move higher and this seems to be the same exact attitude as 2007 when the market kept making new highs and anything was possible. Fast forward into 2009 and nearly everyone thinks the markets can only go up. Everyone seems to believe there is a catalyst out there, the only catalyst is the free worthless monopoly money that falls from the sky, they do not realize that everything in the system is being propped up, they do not realize that 0% interest rates over a long period of time is what created this credit crisis were in now, they don't realize the threat of what 0% interest rates can do to an economy over the long term, they don't realize the impact of a falling dollar and skyrocketing commodity prices. Let them enjoy themselves now with the little fun they have believing markets only move up and that when the economy can only sustain itself on intervention and worthless dollars will they only come to understand how weak this economy really is.





Maybe A Correction Isn't Coming?
Published: Tuesday, 17 Nov 2009 | 6:35 PM ET
By: Lee Brodie
Producer

If you’re waiting for a correction, hope you brought a book. You may be waiting for a while.

At least, that’s what Raymond James chief investment office Jeff Saut seems to be suggesting. In an article published on Minyanville Saut makes the case that a correction probably isn’t in the cards, -- at least if history is any indication.

First ,“we just entered the best six months of the year for the equity markets,” he says. (November through April have, on average, shown superior stock market performance )

S&P 500 INDEX
(.SPX)
1109.80 -0.52 (-0.05%%)
INDEX

Second, “over the past 12 years the Dow has always shown a profit between November 11 and December 5.”

But that’s not all. Saut thinks history may be repeating itself – in an even bigger way.

S&P Action Repeating Itself

Since last April Saut has been using the stock market’s chart pattern from 2003 as a template for this rally – and it’s been spot on accurate.

In case you're like us and not immediately familiar with the market action of 2003-- in a nutshell, ”the S&P 500 bottomed in March 2003 and rallied sharply into June,” he says. “From there it flopped/chopped around for a few months, but never gave back much ground.”

Sound familiar? Well guess what, there’s more.

“In late 2003 stocks took off on the second leg of the rally, rising into the first quarter of 2004,” he says.

And get this. The first leg of the 2003 rally was driven by liquidity-- much like 2009’s first leg (March to June) – while the second leg of the 2003 rally was driven by improving fundamentals and earnings -- just like 2009’s “July through now” rally.

So how should you be positioned? Before the boradcast Jeff Saut offered the following trades:

-Buy American Superconductor [AMSC 32.49 0.71 (+2.23%) ]
-Buy Consumer Staples SPDR [XLP 26.98 -0.02 (-0.07%) ]
-Buy Wal-Mart [WMT 54.13 0.47 (+0.88%) ]
-Buy iShares REIT [IYR 44.26 0.72 (+1.65%) ]

What’s the bottom line?

The bottom line is get long, says Saut. Whatever the resolution in the short term, we continue to believe the major market indices will trade higher into the first quarter of 2010.

 

Course there is reasoning behind reports like this to keep coming out... trying to continue rallying the bulls... the rally of 2003 was driven by a housing bubble among other things.

 

I dont see how they can compare this to 2003. At that time low interest rates and rising home values made the average home owner feel like they getting rich because of home equity. There was constant media babble about limited supply and high demand driving values skyward. The stock market and the economy was fueled by this preceived wealth and the abailty to tap into home equity. It was a spend money mentality. buy New cars, buy lake cabins, remodel the house, buy rental property. make damn sure you out spend your neighbor. The current economic conditions are nothing like that and i dont think there is going to be an endless line of consumers spending thousands on anything in the next few years. This market is being fueled by hype and fear of being left on the sidelines. The fact of the matter is that a rally is a rally it makes no difference how ignorant the buyers are.

Good trading All

 

I thought I'd be creative this time round and give my impressions of what the markets are going to do next if the bailouts and high debt continue through the use of a visual aid.

http://www.youtube.com/watch?v=ViRG78uhiDA&feature=related

 

Ummm, so far thats been a pretty good catalyst.

I have no idea when it all ends, but you need to learn from this and the lesson is that just because something is ridiculous doesn't mean it can't get much, much more ridiculous. And don't delude yourself into thinking that your so smart that you see things nobody else does. The really smart people will profit from what is happening and what will happen regardless of what that may be.

 

"Stock prices have reached what looks like a permanently high plateau."

- Irving Fisher; Ph.D. in economics, Oct. 17, 1929

 

This really is just wishful thinking, so long as the debt exists, these profits are non-existant.

 

+1

 

QE 2.0 is coming soon but they must first pull the rug on equities and sell more debt into the flight-to-quality (at hopefully substantially lower rates).

Gold bugs are going to get absolutely slaughtered. You don't think these major institutions who are short Gold from 1000 are going to take a loss? Buy puts and hedge yourself by staging a terrorist attack. It's simple.

Nothing surprises me anymore with our politicians. I don't know if I want to be around a major city when this happens. And it's going to happen soon.

 

...or may be a correction is coming...