I said about a week ago the market direction would be resolved. I would not exactly call this a break out just yet. Come on bulls! The bears have been put on ice. Only 14% of us left and now your short squeeze fuel is gone. What will carry the market higher? Fundamentals? Unless the economy is about to achieve lift off and all that nasty deflation we were worried about two weeks ago has magically disappeared I guess the only thesis left is: The Fed Has Your Back. So essentially if you are a bull and don’t take profits here you are expecting multiple expansion on what looks like overall numbers coming down. I wish you luck. Perhaps you will be right.
I expect a pull back soon. If we get confirmation I will be shooting energy and financial stocks in the back.
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Blue, just need to blame all the bad numbers on cold weather, port strikes and the fact that we wore blue socks on earnings day.
Jimmy two times,
LOL I agree with you it might be ignored. Earnings are so old school. What am I thinking! Its free money. I shall get back in my hole.
Bluestar, are you saying if we have a pullback, you’d be shorting energy and financials? Could you please explain why? Always enjoy learning and gaining perspective, bull or bear. Thanks.
Love the posts Blue. Always thoughtful and non superficial analysis.
I agree with you. The question for me is how far will the fed go. The fed will continue to support this market. Most are now expecting the fed to raise interest rates in the fall. And of course the counterargument is that the fed cannot ever raise rates because the government cannot afford the interest payments. That being said, my question is this…
Assuming the fed raises interest rates in the fall..
Are you seeing any good estimates on what the raise in interest rates could be?
My thinking is that it would be an extremely small raise. Fractions or small percentages of a single basis point. Then the fed will “watch and see” how the markets react over a 6-12 month timeframe. The point being, any raise in interest rates will be very small and drawn out over a very long period of time.
Great stuff as always. Thanks for blogging here!
I think equities still have a little higher to go yet, albeit not much, before the crash comes. This is in large part because the yen carry trade should continue to work for awhile, and we might start hearing about the euro carry trade soon enough since it seems destined to reach parity with the dollar. Combine that with pitiful US treasury yields and you have the recipe for an equities bubble as people desperate to achieve a meaningful return keep buying stocks so long as they can find large caps with dividend yields higher than treasuries. Rates need to go up, or Japan or the EU need to stop their own QE before any real carnage begins. The difference this time, however, is that the crash to happen much, much faster than it did in 2008. We’re already at higher margin levels than we were then, and when the currencies those are borrowed in start moving in the other direction again the margin calls will be relentless.
20th time is the charm Blue…
Don’t fight the Fed and the jobs report
Jobs Plus Fed
Were talking Jordan & Pippen here.
Gorby, unfortunately Blue has been fighting the fed this whole time. Why stop now?
I’m starting to see some writing on the wall thats making even my overly bullish (optimistic) outlook cringe…$19b for Snapchat (means that it will have at least a $30b valuation when it goes public)…Vice execs having $300k dinners in Vegas…$100m apartments in Manhattan. Nothing that will make me shift my portfolio allocations just yet though.
I really believe destruction of wealth is the only thing that pushes this market down. Everybody is fighting deflation and they can actually push it up through various means that haven’t even been tried (More bush era tax cuts). There is a lot of debt in the system which hampers growth but until the defaults start coming in on the subprime cars or the student loan debt forces large scale bankruptcies and liquidation of other assets or if Greece defaults on all its Euro denominated loans. I believe this market could, not saying it will, rise back to the dot com bubble valuations. That was driven by a bullshit paradigm, this is driven by a lack of risk-free yield. At this point it is hard to put money into the market since there has been no large retrace in such a long time, but for now keep the longs and take small hedges against large events. Some food for thought: if the s&p 500 had the same PE today that it did at the dot com bubble top then the index would be at around 4500 instead of 2100. So there is a lot of irrational exuberance left barring another credit crisis.
Forgetalpha
No doubt Blue is one smart dude and
in time he will be right.I don’t have his
tools(brains) so I mostly use life
experience for my trading. Your right though- this reckless spending
is often a tell of bad times ahead. Wasted capital is always a drag.
When the bell rings I just hope I’m not holding the old maid.
If you were to entertain the idea of buying a stock, what are your top three ideas?
boyaj,
Energy stocks are in a clear downtrend and fundamentals are awful. Stocks do not yet reflect the lower oil prices. Financials will do awful in a deflation and are exposed to energy derivatives and fx derivatives. plus their charts look compromised as they are not making new highs.
surplusdoids,
Dollar strength is de facto tightening. So the Fed may raise 25 bp max but more likely not at all. The $9 trillion in dollar denominated emerging market debt is choking off the global recovery as the dollar rises. This is a gigantic global margin call. This is a liquidity trap. we are zero bound unless they want to pop the bubble. I believe the bubble will pop as more and more debt is unable to pay its interest and the credit markets freeze.
qeinfinity,
I agree, the pent up energy when released will be something to behold.
Option Addict,
Here are 5 in no particular order: GOOG, TDC, LF, ARRY and YNDX!
BlueStar, Great insight.Thanks for the response!
Market seems to be coiling up tightly into the weekend and opex.
IMHO you can stay invested here but stay away from levered balance sheets and dance near the door.
The models I run finally got stretched in 2014 and looks like the same story for 15. Doent mean it cant be stretched further.
BlueStar: Have to agree with you on energy. Anyone who witnessed the oil bear market of 1981-84 (I did) or the 2008 bear market would have to conclude that there is still very significant downside risk in the oil service area. If you don’t think so take out an old chart book from the 80’s and check out Global Marine, Baker International, Rowan Drilling, Halliburton, or Hughes Tool.
I’ve been watching this monthly trendline for a couple months now in $CL (chart from Jan 9th) – http://www.evernote.com/l/AcgJKRiuUENHs5IRyZgVZaPzJOTXeUTkUR4/
A bounce (possibly into September), then a roll over is my current thesis. I think the overall market continues higher until then ..
As an interday trader I have zero bias on which way the market goes..
sell the Greek news bounce?
jimmy,
I am watching and waiting. I would like to see a pop then fade then I will shoot in the back.
Well at least we have an extension of an extension which was extended.
Interesting to see if macro data will ever mean anything again.
Jimmy,
Lets watch next week.
QED
QED = ambitiosior maximus
shoot in the back = short?
R Rule energy – not till 3rd or 4th Qrt
http://www.futuremoneytrends.com/trend-videos/interviews/gold-dollar-war-rick-rule-interview?utm_source=Future+Money+Trends&utm_campaign=ebbce4d32f-The+1+Must-Own+Sector+for+2015&utm_medium=email&utm_term=0_9a1f3a75ec-ebbce4d32f-174430217
It matters not a whit whether the Fed raises rates in the summer.
One day, the bond markets will turn, as investors realise that the 30+ year cycle is over.
That’s when the real fun and games start. Until then, yeah, stocks down as the economy tanks, and earnings too.
Bond yields sharply lower market rising … disconnect following Yellen testimony.
who’s right?
Jimmy,
BlackRock just fired a PM who had on the end of the world trade yesterday. I kid you not but this is a very postive sign for bears. BLK management is classic for top ticking performance on hires and bottom ticking on fires.
Interesting to see the time lag on this indicator. Still long here finger on the trigger.
Jimmy,
I think Thursday we see some action.
I know a few retail PMs with that trade on and they’ve been murdered since 09.
Is there something on the calendar for Thursday or signals lining up.
I’ll run my model tonite to see what the tea leaves say.