Sentiment is as bearish as I've ever seen it. Shorts who thought 1180 SPX was a gimme are trapped. Many stocks that have had decent breaks (GE, CSCO) are large enough Index components that if they have even MODEST bounces off their lows they will POWER this stuff to new highs. Oil was POUNDED yesterday after the close and it seems that a near term top may be in. Back month Gasoline is still priced under two bucks a gallon. Four year lows in unemployment, a perma bid below because of good 2nd quarter reported earnings, I see NOTHING that can stop this stuff before November.
I hope you're right--I'm positioned for a continued uptrend or upside explosion, or whatever way it pans out. I am still trying to find an intelligent way to hedge these positions but I'm still weighing my options.
QUOTE]Quote from super-ego: Sentiment is as bearish as I've ever seen it. Shorts who thought 1180 SPX was a gimme are trapped. Many stocks that have had decent breaks (GE, CSCO) are large enough Index components that if they have even MODEST bounces off their lows they will POWER this stuff to new highs. Oil was POUNDED yesterday after the close and it seems that a near term top may be in. Back month Gasoline is still priced under two bucks a gallon. Four year lows in unemployment, a perma bid below because of good 2nd quarter reported earnings, I see NOTHING that can stop this stuff before November. [/QUOTE] bearish sentiment at a top is very different then bearish sentiment at a bottom --- cpi/ppi are going to do nothing but curve up in trend, corporate earnings will at best be static for a few months and what the fed does next will make a big difference in the mindset of those that now "expect" the fed to be done. this does not even include going forward retail sales and consumer confidence numbers {which just got whacked this week and upcoming numbers will show this}. then we have numerous major companies with some extensive fundamentals problems {us automakers, airlines, and anyone that has a lot of shipping/transportation costs in their products}. there will be thinning margins with many companies and this will hurt earnings and thus P/E ratio's. there is a lot of resistance above our current price levels and it will take some major sentiment shifts to get through this -- i personally do not see anything on the horizon that will propel sentiment forward. if anything we have high current index levels that have a lot of tension building up for downside movement potential. all this liquidity pumping in for something {continued rally} that may not take place will magnify the effect of our current downward tension once the collective sentiment is triggered into selling. which ever way this upcoming move breakouts, it will be extremely forceful in my opinion. we have all seen what happens when a once trusted levee breaks.
Bearish sentiment at the top usually means a short squeeze is coming which would explode stocks higher obviously. Usually after the squeeze though the markets get faded and the uptrend ends. So we definitely could spike up in the coming weeks/months but if it turns out to only be a short squeeze, then the spike will ultimately be faded.
Some nice thoughts by Macro and Drukes. Yes I too think underlying conditions are quite negative. Unfortunately I think we stay somewhat buoyant until we see earnings data in October that negates the euphoria of late July. I expect instead of the typical year end rally, that this December will be a bloodbath. However I'm already a leveraged short and becoming VERY distressed by the amount of bearish talk I hear from family and friends who are at best casual market observers. I'm also concerned that the pattern of weak Septembers will be broken. Although the market did marginally better last Sept(04), 2000, 01, and 02 were disasters. The strong tone of past August's was reversed this year and I look for a reversal of those Spt slides. The market did a great job of changing it's profile from post-London to post Katrina. While we did no work or filling off the London lows we spent three days in the lower 1200's making me believe that the longs would ultimately be trapped. Wrongo. I believe last months highs, particularly in SPX were valid macro resistance. Perhaps even for keeps. The RUT however seems to view 700 as a magnet. My scenario over the next six weeks is a choppy move upwards for a test of the old highs in SPX and NDX with new mid-cap highs. The Dow has me perplexed, and is yet another indicator that worries me as a short. I've never seen a DJI led move. I'm not a conspiracy/manipulation guy but I believe the Dow is window dressing. Perfect case in point right now. Joe Sixpack thinks the market has been sluggish post Katrina because of the Dow, yet the general list has rallied sharply.
Its funny i think that the bulls are trapped, the rallies are less and less and their calls are decaying rapidly... Furthermore, the fact that someone is trying to "will" the markets higher over the weekend shows that they are in ether mode, ie not grounded in reality.
I canât say if we are going up or down in the market but I donât think the economy is in good condition for 90% of America. The wealthy are doing fine and the market gets its money from them. The rest are slaves fighting for the crumbs they drop. The job numbers are based on voodoo math. The salary they offer average people are far less then 8 years ago. Normal people donât have money to spend and that was important in the past. People donât have savings. A lot of peoples retirement will be the home they own and 401k.
Don't forget the parade of earnings warnings coming in mid-to-late September when businesses get a better feel for impact of the oil shock. With that said, for many of the company's tied to discretionary spending, it may very well be a cover the news event as the stocks are already getting crushed on the rumor.