The euro is surging on news of Germany economic relief programs. Honk Kong aslos surging. We could get a 30% rally if the dollar tanks and inflation begins to picks up. That will stick the final nail in the coffin of the deflation spiral myth.
.. be careful what you're wishing for ... it might follow after a 20%+ drop caused by who knows what ...
Largest rallies occur during bear markets. Sharp, sudden. Agree that this bear will last a decade...but expect a wild ride....the vix got to over 80 last november...loved the trading opportunities.
Value houses putting capital to work drawing others afraid to miss the boat...with market moving up the negative end of the world stories dont appeal to everyone as much... they want to believe the end is near.... maybe little joe starts getting in as well.... throw in few earnings suprises on estimates which have been cut down for end of the world scenario...of course someone could also solve cold fusion tomorrow
Not bad fundamentals? Record levels of unemployment dating back over 50 years. Astronomical, unprecedented levels of government debt. Record numbers of foreclosures. Estimates of historic numbers of bank failures. This sell off is due to a lack of confidence due to horrible fundamentals. I am looking for another 20-30% decline in this market, not a rally.
There is no catalyst, as I have been saying there doesn't need to be a catalyst to push the markets higher in a bear market. There will be sudden rallies in this market, don't be fooled though, this bear market will be here for many years, I predict at least a 7-10 year bear market, this market will trade sideways for many years as economic growth stalls.
Markets will break new lows, I see the SPX breaking down towards 700, I do see 600-650, however we will see strong bear market rallies of 5-10% that have to be sold. Another 25% drop is definetly in the making.
As I recall sitting in front of my trading screen at the time it was the Iraq War ... in particular the day they tore down the Saddam statute ... and I also think it was the perp walks and arrests of Skilling and company and other CEO's ... typiclly the perp walks and crucifixion of ceo's and madoff types come real close to the bottom ...
This is a good candidate for the type of catalyst I am talking about, although it would practically create zombie banks. Either this, or nationalization. But I don't think any long term investors or hedge funds will run to buy banks (or cover shorts), if they fear a possible nationalization. Same thing for private capital. Once it happens however, the will be no more uncertainty. In a bank crisis, someone has to step in and recapitalize the banks. In the 1907 panic, it was a group of bankers led by J. P. Morgan and the US Treasury (there was no central bank). Unfortunately it was not a one day event, but a process that took about a month before the market turned. During the month after each problem was solved, a new problem emerged. The Dow Jones index fell a total of 50% in that year.
Using the '03 reference point, many of my favorite stocks are not priced at '03 levels (yet). Or let me rephrase that, there seemd to be a boatload of stocks opps under $10. There must be some underlying support.