Large caps have begun to reassert themselves vs small caps so I'm not too concerned about the relative underperformance of small caps right now. The chart here is Russell 1k vs Russell 2k. We rallied through rate hikes that took rates higher from close to zero. Until recently, real rates have been extremely accomodating. Accomodating enough to ease the impact of $60 - $70 oil. Also, money chases better performing assets. Commodities have been very popular the last several years and now they're tanking (which has several implications). Real estate has taken hits and that's likely to continue. A lot of money is going to be thrown at stocks now, in my humble opinion. Realistically, yes, there's risk being long here. There always is but I think there's more risk being short at the moment. If the potential of a Dem Congress starts to bite in a couple of weeks and earnings disappoint things will change but I'm staying long right now.
No! I'm afraid not! My secret indicator says no. The secret indicator is the Chicago Tribune classifed section. OK! Laugh all you want. I've follwed this for over 20 years for a variety of reasons. Demand for skilled positions are down over 50% from earlier this year. Demand for industrial sales positions is down nearly 75%. Demand for front line supervisors is down as well. General bullshit sales jobs are down hard. Mark my words, this spells a hard downturn coming by years end. Q1 of 07 will be worse. Throw in some geopolitical crap, a dem congress and the market is toast.
http://bigpicture.typepad.com/ The Narrowness of the rally continues: ice All time high Date of high Recent high % off all time high Dow 11,750.28 (1/31/00) 11647.69 0.25% Tran 5,013.67 (5/31/06) 4433.34 11.57% SPX 1,552.87 (3/31/00) 1333.7 14.11% Nasdaq 5,132.52 (3/31/00) 2258.3 56.00% NDX 100 4,816.35 (3/31/00) 1656.07 65.62% Russell 784.62 5/31/2006 729.94 6.97% ⢠The Dow has only 10 stocks above their January 2000 highs, and of those 10, four are responsible for dragging the index higher â Boeing, United Technology, Altria and Caterpillar. ⢠Despite the recent move towards big cap and tech, be aware of the pundits who have been advising you of this for the past 5 years have been very, very wrong. (We made the suggestion to shift to big caps over the summer). The Nasdaq 100, for example, is still down an eye-popping 65% from its 2000 highs. ⢠The 3 bullet points above are why most investors are not feeling like they are at 6 year highs; Unless they hold only Dow stocks â or the 4 mentioned above â most investors portfolios remain far below their 2000 peaks. ⢠Cash has outperformed the Dow since January 2000; Even considering reinvested dividends; cash STILL out performs the Dow. ⢠The Dow's Real (inflation adjusted) performance, even with dividends reinvested, is significantly below breakeven.
The longer this range we are in for the ES holds, the more I am of the thought that big money is rotating as defensive as possible under the veil of, "WOW THE DOWS AT NEW HIGH's....BUY, BUY, BUY EVERYONE!!!" We have 1353.25 and 1357.25 as the next market profile levels just above our recent highs. Until these two levels are blown out with initiated buying, I will keep taking swing SHORT trades as I get good delta based signals.
Its an economy based on asset appreciation. When asset appreciation begins to soften watch out. Credit has been growing at over 10 percent for years!! Its going to very difficult to keep generating credit at the pace its been going and when its stops its going to be party over.
Ehhh who cares about reality, the official numbers say that the job market is doing great, inflation is low, productivity is up, etc.
You are 100% correct. The numbers look good, for now. But they're going to start looking worse, alot worse by Q4 reports. There will be no "January Effect" this coming year. Earnings are going to start coming out next week. I'm thinking they'll be slightly weaker, just enough to stop the rally, and we drift sideways to down until years end.