S&P's New High for 2009 - Another Victory for the Bulls

The correction from August the 14th & the 17th was only 3.4%, a mild and healthy pullback (not a bloodbath) for the S & P index. That pullback was followed by four positive days, with Friday August 21 making a new high for 2009 at 1026.

Chart here.

This new high for the year was a victory for the bulls, confirming that "the trend is in fact, your friend". The bears are still talking about the next Great Depression, while missing out on one of the best bull runs in market history. The bears will probably wait until the S & P hits 1600 before investing their money back into the market. That's fine with the bulls because we will be buying the shares that the bears are selling.

The bears have been talking up the high unemployment rate for quite some time as their primary argument for another downturn in the markets . However, the bears are failing to see that the new unemployment claims are trending downward. The 200k loss of jobs will eventually be 100k lost, then we'll get to zero jobs lost, and finally back to job growth.

Other bullish news was the reporting of existing home sales for June which marked the third consecutive month of rising home sales at 4.89 million. First time home buyers are taking advantage of the 8k tax credit, attractive home prices, and low interest rates. Experienced buyers are enjoying the latter two.

Consumers are spending less but saving more. Spending less may hurt the short term economy, but will be better for long-term growth. This will probably result in a healthy, gradual improvement in the economy which is better in the long run. If consumers continue to increase savings then there will be plenty of money to pump into the economy when people feel they are ready and there will be less burdensome debt in the system. Furthermore, with increased savings, banks will have more capital, increasing their strength.

Comments

[Dave Wrixon:]

A new victory for those with a vested interest in manipulating the markets, i.e. the large Financial Institution and the Federal Government and Bank.

The Bulls themselves are going to be the ones ending up badly burnt.

Aug 23 08:43 AM

[Roger Knights:]

Bullshoot.

Aug 23 08:53 AM

[enigmaman:]

Ones perspective has nothing to do with reality, for every rational argument for this rally this is one just as rational against it. This rally strength has baffled the best in the business, those Institutional MM who were doubters are now believers for no other reason then they cant afford to be on the wrong side of this market. One would be a lier to say that in more normal times the underlying fundamentals of the market, government driven technicals and economic realities would be considered negatively by current bulls. But this is what makes the market what it is and thats why the retail investor has not participated ( no volume), they have seen this movie and they know how it ends so they sit on the sidelines safe in cash. My question, what happens if they stay on the sidelines, where does the needed juice to push this market higher come from, from all accounts the institutional MM are all in, GS can only do so much without more jumping on board, I guess we will just have to wait and see

Aug 23 09:37 AM

[Baboon:]

On Aug 23 09:37 AM enigmaman wrote:
>But this is what
> makes the market what it is and thats why the retail investor has
> not participated ( no volume)

My take is opposite to yours: no volume is rather indicative of the professionals staying on the sidelines.

Aug 23 10:43 AM

[DaveW:]

When I think of bulls and their belief that this is true recovery, I'm reminded of that commercial where there are a dozen monkeys around a table in the boardroom, they are depressed seeing the chart pointing down, so one turns the chart 180 degrees, now the chart is pointing up and the monkeys erupt with unabashed jubilation and screeching.

Aug 23 10:45 AM

[E Nuff Sed:]

Arguing with a recovery again. When will you guys learn? A recovery is born out of sentiment not fundamentals.
Fundamentals take over only when a market is mature.

Aug 23 02:37 PM

[David Zanoni:]

Thank You, E Nuff Sed. I appreciate your sense of reality.


On Aug 23 02:37 PM E Nuff Sed wrote:

> Arguing with a recovery again. When will you guys learn? A recovery
> is born out of sentiment not fundamentals.
> Fundamentals take over only when a market is mature.

Aug 23 05:05 PM

[anarchist:]

Well said "Nuff Sed". This Market has had every reason of crash since it's recent bottom in March but it has moved higher. Everyone wants the recession to be over so even if it isn't 'it is" and they are buying, especially on pullbacks. As this market has moved higher more and more investors are getting the "I missed the buying opportunity of a lifetime feeling". I feel it here on SA with so many negative post trying to defend their "fundamentals" reasoning for having missed an almost 50% move to the upside, wishing for a market collapse so they can say "see, I told you so".
Those who have rode this rally have plenty of room to absorb a major pullback if it happens and still have a profit when they decide that "the bear is back" and sell.


On Aug 23 02:37 PM E Nuff Sed wrote:

> Arguing with a recovery again. When will you guys learn? A recovery
> is born out of sentiment not fundamentals.
> Fundamentals take over only when a market is mature.

Aug 23 07:51 PM

[roflmfao:]

when did low volume stop running become a victory for the bulls?

Aug 23 08:29 PM

[inthemoney:]

I find it funny how people see the market as some sort of a sport, bulls vs. bears. When a market is going up, the hosts on CNBC for example, announce it with loud and cheerful voices, the only thing they are missing are pom-poms.
The reality is the market is almost a zero-sum game with a tilt in favor of bulls. You are not there to cheer for your favorite team, you are there to make money regardless of the team your are on.

Aug 23 09:24 PM

[E Nuff Sed:]

I like the phrase "The reality is the market is almost a zero-sum game with a tilt in favor of bulls" by "Inthemoney".
Consider this chart of market cycles:
www.scribd.com/doc/180...

Aug 24 01:44 PM

[David Zanoni:]

Well, we might as well make the stock market fun - it sure does beat being boring. Lets go Dow Jones, Lets Go! CLAP, CLAP;
Lets go Dow Jones, Lets Go! CLAP, CLAP !!

Low volume or not, trade what is in front of you and enjoy the gains.

Lets go Dow Jones, Lets Go! CLAP, CLAP !! Victory, Yeah !!

On Aug 23 09:24 PM inthemoney wrote:

> I find it funny how people see the market as some sort of a sport,
> bulls vs. bears. When a market is going up, the hosts on CNBC for
> example, announce it with loud and cheerful voices, the only thing
> they are missing are pom-poms.
> The reality is the market is almost a zero-sum game with a tilt in
> favor of bulls. You are not there to cheer for your favorite team,
> you are there to make money regardless of the team your are on.

Sep 11 10:56 AM

[David Zanoni:]

The monkeys are actually all of the bears that don't want to believe the rally because they are not participating in it.


On Aug 23 10:45 AM DaveW wrote:

> When I think of bulls and their belief that this is true recovery,
> I'm reminded of that commercial where there are a dozen monkeys around
> a table in the boardroom, they are depressed seeing the chart pointing
> down, so one turns the chart 180 degrees, now the chart is pointing
> up and the monkeys erupt with unabashed jubilation and screeching.

Sep 11 11:00 AM