So Much for a Pullback

Not long ago I asked myself: what's driving this market?. Looks like the answer is clear: it's driven by sentiment.

Sentiment is always a contrary indicator. There are two major themes in most recent market commentary. Bulls think that there should be a significant pullback and they are ready to buy that pullback. Bears still don't believe that bull market is for real. My unscientific count on CNBC is about 50/50. Which probably means that the rally is going to continue. By all counts, it would be incredible, We had 9 weeks of bull market and now it looks like consolidation. But this market is incredible.

Technicals look better after yesterday's rally. Nasdaq composite crossed above its 200 day moving average. If it can hold here, we have a technical confirmation. As for fundamentals, they are still bad, but there is some improvement.

I'm getting ready to buy more. More tech, some REITs, some European companies or ETFs, some debt ETFs or CEFs. And I'm looking for other opportunities.

This bull market will be over when we see a buying panic. That's going to happen when everybody turns bull and start buying everything in panic not to be late. Close to the end of quarter it can be multiplied by window dressing. That will be the time to take some profit. For now: buy, buy, buy!

Comments

[Greyowl:]

Well, sentiment does drive the market. But, IMHO, this rally has not been driven by sentiment - glance through articles at SA: more then three quaters are quite bearish (some extremely so), with predictions of new lows and breakdowns.

This rally has been driven more by supply-and-demand: the government pumping money into the financial system, trickling of cash from the piles of money on the sidelines. Only now the sentiment is really changing, though according to SA, not that dramatically

May 19 08:51 AM

[jeandit75:]

...and I would add that the market has been pulled upwards by hope. Hope that the banks would not need capital anymore (wrong!), hope that the residential market would find a bottom (wrong!), hope that the consumer spending would come to life quickly (wrong! again). I am afraid that the green shoots don't materialize before late 2010 meaning that this whole rally about hope is fianally just hopeless.

May 19 09:41 AM

[太阳黑�...:]

Some stock will continue and most will fall...

May 19 09:56 AM

[Larrysyr:]

The S&P 500 remains down around 30% from the end of August.
The only real sentiment I see is relief that the world-as-we-know-it hasn't ended.

May 19 10:29 AM

[The Geoffster:]

Agreed. It's a government bubble. Wait a minute. Isn't the FED owned by the TARP banks? Oh what a web we weave...


On May 19 08:51 AM Greyowl wrote:

> Well, sentiment does drive the market. But, IMHO, this rally has
> not been driven by sentiment - glance through articles at SA: more
> then three quaters are quite bearish (some extremely so), with predictions
> of new lows and breakdowns.
>
> This rally has been driven more by supply-and-demand: the government
> pumping money into the financial system, trickling of cash from the
> piles of money on the sidelines. Only now the sentiment is really
> changing, though according to SA, not that dramatically

May 19 11:22 AM

[BigJake:]

I don't think the jury is out on a pullback just yet. If we break 93 on the S&P it will be confirmed, but not until then. I have no idea which way it may go either, but I wouldn't hit the triple buy button just yet. We'll know soon enough!

May 19 12:32 PM

[Larry House:]

This isn't a bull market by any definition. Trading is the current name of the game. Be careful and use tight stops.

May 19 01:52 PM

[HardRock:]

Watch out for the left shoulder dip coming June 18th 2009; after completion of this inverted head and shoulders.......then we're off to the races!

May 19 02:06 PM

[TonyNasir:]

Couple of weeks ago, Nasdaq was unable to hold above its 200-day moving avg. and if it does it again, there will be no mercy this time!

May 19 02:56 PM

[Alex Filonov:]

But that's the thing: sentiment is a contrarian indicator. If three quarters of commentators are bearish, that's extremely bullish.

On May 19 08:51 AM Greyowl wrote:

> Well, sentiment does drive the market. But, IMHO, this rally has
> not been driven by sentiment - glance through articles at SA: more
> then three quaters are quite bearish (some extremely so), with predictions
> of new lows and breakdowns.
>
> This rally has been driven more by supply-and-demand: the government
> pumping money into the financial system, trickling of cash from the
> piles of money on the sidelines. Only now the sentiment is really
> changing, though according to SA, not that dramatically

May 19 06:24 PM

[Greyowl:]

And who's buying in this case, Alex?

I'd think that's rather an indicator of the bottom with a rally following thereafter.

When the rally goes on for so long, how that can be still a contrarian indicator?

Some insights will be appreciated. Thx

On May 19 06:24 PM Alex Filonov wrote:

> But that's the thing: sentiment is a contrarian indicator. If three
> quarters of commentators are bearish, that's extremely bullish.<br/>
>
> On May 19 08:51 AM Greyowl wrote:

May 19 08:06 PM

[Tomcat101:]

If I buy some SSO it will cause the market to go down at least 20%. If I wait for the infamous pullback the market will go up another 20%.

May 19 09:34 PM

[Missing_Link:]

This was an absolutely useless article. Nothing but wishy-washiness, opinion, empty musings over sentiment, and unfounded speculation.

I wish there were a "don't follow" button so I can track which editors I don't wish to read ever again.

May 19 10:48 PM

[YoYoMama:]

If your time horizon is 10 - 15 years or more, the valuations are too good to pass up. Great companies are now at fire sale prices, and a lot of long term investors are buying in.

May 20 10:09 AM

[TeresaE:]

A year ago we were being told that (other than Michigan) our economy was "stable".

This is a fool's rally based on over-optimism and lack of knowledge of what is occuring in the real world of your customers.

We really need to keep in mind that after the crash of '29, stocks went HIGHER before plunging to lows that were not recovered until the decade following WWII.

And while we are back there looking at history, maybe we should spend a minute looking at the Weimer Germany situation and the run up to Hitler.

Their stock market was in a rally for a while too.

May 20 11:36 AM

[friar tuck:]

hey missing link, it looks you are missing a link or two. would someone let theresa know that this ain't 1929. we have television and computers. we bathe everyday instead of once a month. we have grocery stores full of food and a population that is much more educated.

May 20 02:02 PM

[Fred Voetsch:]

"I'm getting ready to buy more. More tech, some REITs, some European companies or ETFs, some debt ETFs or CEFs. And I'm looking for other opportunities.

This bull market will be over when we see a buying panic. That's going to happen when everybody turns bull and start buying everything in panic not to be late. Close to the end of quarter it can be multiplied by window dressing. That will be the time to take some profit. For now: buy, buy, buy!"


Just in case you jump out a window or something before I get to thank you: thanks for your money!

May 20 07:43 PM

[E Nuff Sed:]

Invest with the wind at your back! Divest when you feel it on your face.

May 20 08:05 PM

[E Nuff Sed:]

As to who is buying - read my comment from a couple weeks ago
seekingalpha.com/user/...

May 20 08:11 PM

[31October:]

Sounds similar to "not even God could sink the Titanic..."

P.s., unemployment is 14% if you use real, non-fudged numbers. That means less consumer spending and more foreclosures. I think God may have spoken, but you were typing too loud to hear.


On May 19 04:08 PM Cetin Hakimoglu wrote:
> All this market does is go up. Nothing can stop it but the hand of
> God.

May 26 02:48 PM