The Bull Is Back...on So Many Levels 21 comments
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The bull is back... and I mean that on so many levels.
Let there be no doubt now; a close over S&P 500 950 puts us over the 200 day moving average in either the exponential moving average universe or the simple moving average universe. [Jun 3, 2009: Why I Use Exponential Moving Average] The squiggly lines assure us stocks can be bought without fear, and shorts are back to their role as heathens to be mocked or talked about in hushed tones at cocktail parties.
As I peruse the "simple moving average" chart I posted in the Jun 3rd entry above, you see a perfect technical formation; a break over the (simple) 200 day moving average, then an exact retrace to the line (which was bought hand over fist).
As I judge the slope of the advance, we seem on track to all time highs on the S&P 500 by Labor Day. You laugh I know, but in a world where valuation means nothing - we can do this. Together. I call on all those Americans who sit at home in bewilderment to send their entire unemployment check to Etrade or Ameritrade and get into the party. I call on governments to take their federal stimulus money and apply it to the stock market so they can solve 2010 budget shortfalls "the easy way". I call on the federal government to put their money into the stock market so... wait a second, been there - done that. Nevermind.
A quick word on the employment report, which I'll report on more in depth later - (1) I don't recall seeing such a variance between the ADP report and the government report, but when in doubt, I always trust the government over a private sector report (2) I cannot wait to see how many jobs were created out of thin air in the "birth/death model" and (3) there appears to be a shadow inventory* of unemployed people just as there is a shadow inventory of housing stock - despite "only" 350K people losing work, the unemployment rate jumped higher than expected.
*remember as I explain in each month's employment discussion in America when you are out of work for 4 weeks, AND stop "actively" looking for work, the government says you are no longer unemployed. Therefore, many of these "not unemployed" people apparently started looking for work again the past month. Even though they are not unemployed. Government reports are cool like that.
Normally I'd have pause that every blog I scan now that is not of an economic focus is bullish and has given up the ghost on shorting. Or that every blog is now on the same exact reflation trade. Normally, I'd be worried that these trades are crowded, or the entire crowd is now on one side of the boat.
Normally, I'd be worried that each day I see I can buy stock on every dip and never have to worry about losing money within 48 hours. Normally it would seem so simple to be a long as to be egregious. I'd wax poetic about how this is setting us up for a reversal that no one is positioned for. But these are not normal times - I have the "insistent bid" always supporting us to make sure the market never really goes down.
So with that, a toast S&P 1000, hopefully by the end of the day or at latest next week. And I can break out my Dow 10,000 hat which was so fashionable in 1999. We've made much progress the past decade.
Like a lemming jumping over the cliff, I'll be joining the stock hungry crowd and buying long exposure. The angry mob is running over each other to buy stock... preferably of the 40-70 PE variety.
Latvia Shmatvia.
Kool Aid.
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We know the Dow represents 30 stocks, and that technically it is much more important to follow the broad S&P... but ask 99.9% of Ward and June public what the "market" did today and they will say "It was up/down 100"... they will not be talking about the SPX when they say that.
My bet is Jamie's kids punch it thru very soon.
On Jun 07 09:45 AM wpdragon wrote:
> Trader Mark, before you break out the Dow 10,000 hat you may wish
> to break out the Dow 8860 hat. We STILL haven't broken through that
> 200 EMA level despite trying all week... its the last barrier, but
> I'm sure your "perma bid" is all set to take it down as early as
> tomorrow.
>
> We know the Dow represents 30 stocks, and that technically it is
> much more important to follow the broad S&P... but ask 99.9%
> of Ward and June public what the "market" did today and they will
> say "It was up/down 100"... they will not be talking about the SPX
> when they say that.
>
> My bet is Jamie's kids punch it thru very soon.
Like they say, "it won't happen overnight but it will happen".
Now to the fundamentals. Who in hell really knows what the market is seeing a few months out down the road? While TraderMark gripes that P/E is out of whack it is because he (or I or anyone for that matter) can not really figure out the "E" part of P/E going down the road. If you use an optimistic number for the "E" then you are way undervalued and if you use a pessimistic number for the "E" then you are way overvalued. The market appears to be betting on a much larger "E" then what the bears seem to be forecasting. The next quarter earnings period will shed a more clear light on this picture.
However, I hasten to point out something important. It is the action in markets in China and India. I had noticed that the three markets (U.S.A., China and India) were pretty much in lock-step until a few weeks back. In other words, the old adage that when the U.S. sneezes China and India have caught the flu used to be true but no longer. Both China and India markets are making new highs as if they are unhinged from the U.S. markets. Does this mean that the theory that the China stimulus is going to drag us out of this rut has some validity to it? If consumption picks up substantially in China and India and the U.S. consumer is not as bad off as we thing he is then it is possible that the "E" part of our multi nationals will improve more significantly than we have given them credit for.
There is hope when you look at the fundamentals with the colored glasses I wear when I look at them. The only danger I see is if the next Q numbers don't validate to the market that the "E" picture is improving substantially then this rally may run into a wall. If however the "E" picture as envisioned by the street seems to be on track then we are looking at the Dow plowing pas 9000 and S&P past 1000 to new heights. Doom, death and despair that you see in the air aside what the market really cares is if the "E" is solid in the "P/E" and so far there are signs that it is.
In a world where valuation means nothing the stock market loses all meaning. You might as well go to a casino.
Check it out > tinyurl.com/p4aqsv
Look at the DOW Spring of 1930, that is where we are.
Statistics are fine, but they are driven by reality. The reality is that unemployment is 10% or higher, credit card and ARM resets will increase defaults 10-20% this Summer, Fall, and the bottom will drop out of commercial real estate.
Throw your money in boys, someone needs your cash on the other side of the trade.
www.fundmymutualfund.c...
I am egregiously shorting this market. get real and abstain from the kool aid. Summer is a time to fear the dump. Check your Traders Almanac.
300k suprize is bull****
ADP report is over 500k for May
until we run out of suckers.
On Jun 07 09:12 PM cebu sun wrote:
> FLYspeck
> I am egregiously shorting this market. get real and abstain from
> the kool aid. Summer is a time to fear the dump. Check your Traders
> Almanac.
Let there be no doubt now;..."
The statement alone brings all kinds of doubt into my mind. As more people adopt this stand, the greater the correction ahead. The steepness of the rise of the market has everything to do with a market that lacked proper liquidity. Of course, always liquid but when a market has a lack of buyers at any level due to potentially catastrophic financial chaos on the horizon, a liquid market has the capability of offering up once in a lifetime assortment of undervalued opportunities should perceptions change in a rather short period of time. The sharpness has nothing to do with how great things look ahead, but only comparatively to how bleak they looked before. The economy shows more signs of life than before but nothing near what it will take to pull us out of a miserable situation. Later this year, the government will be announcing that the economy is out of recession. But it will only be because they will be comparing the 4th quarter 2009 with 4th quarter 2008, which fell off a cliff. Unemployment will be double digits for some time to come. The stock market will not revisit March lows but it will correct and remain range bound. We're going retro. 1966-1975 here we come.