This is the time I've been waiting for. I closed all my longs this afternoon and am seeing a lot of divergences in breadth. I'm hoping wednesday has one last squeeze to the upside so I can get a good price to put on a short position. I've been bullish for the past month, since the bear stearns bailout. Check my previous posts if you don't believe me. I started changing my sentiment last week, and finally closed everything at the close today. I wanted to add something: my $spx target has been 1420, I'm hoping for 1430 tomorrow to initiate my short position, that is the maximum upside that I expect. Opinions? Disagreements?
There's too much fuel flowing into equities right now. I think the retail money has just actually started to flow back in from low yielding savings accounts, money markets and bonds (including treasuries). As bad as the economy is, with inflation causing negative real returns on savings, tax exempt bonds (especially for the uber wealthy) or equities are the only games worth playing now. Real estate has lost all cache, house flippers have become house floppers, and small business owners are suffering terribly, for the most part. I believe there was 3.5 trillion USD in money markets and CDs at banks, alone, as of last month. With even 'high' yielding accounts bearing 3% interest, at a time when food, gasoline, energy and most other costs are rising, even average people will feel as if they're being cheated and that they're losing ground - and being punished for being risk averse and responsible. There's more upside.
I understand all this, but we have seen a huge move in a month's time. What is your upside target from here? We reached my target of $spx 1420 today.
I can't possibly know that, and guessing is a fool's game, IMHO. I think picking a number is less important than feeling the trend and mood that is driving the move.
The problem with feeling the trend is knowing how far into the trend we are? The "Get the hell out" thread was started roughly 75% into that move before bouncing up from the 1270's. FWIW I agree and think the trend is up but i would not be buying before expiration next week; we will probably have at least one or two large down days before then.
I said get the hell out on 2-28-08. That was almost exactly prior to a major pullback on all indices. I see stocks with better fundamentals, tons of cash, little to no debt, that have been insanely and irrationally pummeled since then. I expected it in housing, financials, etc, but not some other sectors that are still making bank. Finally, we may see a USD rally here, for how long, no one really knows. If so, that's likely to reign inflation in, adding some more fuel to the markets, as it will bring oil and imported commodities down, and help ease consumer pessimism.
FWIW, I'm looking for a move to the 1440-1450 area at which time I plan to buy S&P Puts with an expectation of falling back to the 1390 area. Consolidation the rest of May (post expiration next week) then a strong up move throughout the rest of the year. I could be wrong.
You're really rolling the dice here taking a short. With that said take about 30% of the pos. you would normally take. We start breaking through this range it should be a fresh shot to 13,500 though. Personally, i'd wait for some support to break first which i'm sure it will. Just hasn't happened yet. We're not out of the woods yet in the equities.