The end of January is upon us. This is usually the time that “investors” come out of their New Years haze of pushing whatever capital they have into the marketplace. You see, every year, just around the holiday season, money managers become entranced in the hypnotic dance of “Portfolio Adjustment” and “Window Dressing”. It is the theory of selling your losers and adding to your winners and that makes most look just a little bit better around bonus time.
But when January rolls around, just the opposite occurs; the crap that was beaten down, jettisoned and otherwise regurgitated become the object of love and affection. That is the heart of the January Effect. It used to apply just to small cap stocks. Then it became famous for the Dogs of the Dow. This year it is meaningful to the worst performers from last year from any sector. And the results are very pronounced.
But aside from the “Amok Time” for money managers, I’m amazed to see my lone prediction of 2011 come to full fruition. You see, my prediction was that 2011 would look very much like 2010 in terms of the Calendar. And exactly like in 2010, 2011 had a 20%+ gain starting in the beginning of October and the quarter and extending into the first quarter of the New Year.
Like clockwork, over the past several years since the 2008 crash, this time of the year brings about a raucous markup of highly liquid financial-related assets. And like clockwork, during this same time-frame, the estimated prices of homes drops between 6-12%. Last year, in 2011, we were square in the middle of a fabulous QE stimulus where seven billion dollars a day was funnelled into the closed loop of the financial system in order to aid prices. This year, in 2012, we have Operation Twist which was not nearly as strong as last years stimulus. But the rally was birthed around the world simultaneously and on the day of the technical breakdown, October 4, and it has not stopped as of this date. Yet, most everyone looks at the markets with a glazed eye of doubt.
This goes back to our “training” as “investors”. The playbook is the same. Bad news means more stimulus and free money. Good news may mean that all the free money is working. But deep in their hearts, everyone knows whats really going on. But we all play along just the same and will continue to do so until either a “new beginning” or “the end”.
Technically we are overbought by every measure. But that is not enough to turn the advance into a reversal. We are simply in the “Pause the Refreshes” and not pulling back much. SPX 1300 for 2012 is as SPX 1200 was for 2011. And everyone is waiting for more stimulus in this, an election year.
The first pullback will test the breakout near SPX 1260. Then we shall see whether this pretty uptrend is just another trap in an extended trading range, or something else.
14 Responses to Second Verse Same as the First
Second verse same as the first,
A little bit louder, a little bit worse.
i wanted to yell HENER-Y when i saw that title. thanx
When is this first pullback going to happen?
why tomorrow, of course…
Well new orders for our company that sells to a bunch of industrial names have collapsed in January. So far they are coming in 32% lower than in Jan 2010 and 46% lower than Jan 2011. This doesn’t happen unless there is a recession. Sales are starting to dive now too.
Look Bear Boi, there is no recession. The money is going to a good place; Apple. The equivalent of 10% of the entire U.S population bought an iPhone just this past quarter. So just buy APPL and don’t worry about a thing.
I get now, Apple is the market. What’s interesting is that much of Apple’s success is coming at the expense of other companies traded on the Nasdaq – RIM, HP, Dell etc. Yet they are the tide that seems to lift all boats. I still think we plunge in Feb and see QE3 within the first half of the year. BTW, I hope you saw that India will pay Iran gold for oil and China is expected to follow. I firmly believe this next decline leading to QE3 is the last chance for bears to short, get out and get physical.
A lot of tax write-off ended Jan. 1, 2012. The commies in power don’t want to extend any of them.
You’re finally going to get your moment. You’ve been preaching a collapse since August, and again in October, and you were painfully wrong both times (see my comments then). Now, mathematics says the Apple earnings and State of the Union will give the smart investor one last push before correction (Friday). I thought Tom DeMark had it right, but he was a few days too soon (see Bloomberg, Friday interview). I was a bit too soon as well (see Fly comments). The bears will be richly rewarded this week.
LETS SET THE RECORD STRAIGHT…
1. I called an end to the Bull Market in the last week of May and was on Yahoo during the first week of June.
2. I then called for a bottom near SPX 1060 and then perhaps an intermediate-term bottoming process. I certainly admit that the bottom on October 4th was rather shocking and hard to believe. In hindsight it was created almost exactly as it was a year earlier and completely fabricated.
AND ONLY NOW are we challenging the level where I called an end to the Magical Mystery Bull Market.
I can attest that you’ve called the market pivot points quite well, Scott.
But I don’t understand the comment that the October 4th low was “fabricated”.
A three month sell-off, like the one that ran from mid-July to early October, is just the result of short-term investor psychology, which itself is based on (mostly) rational assessments of future economic developments.
“But deep in their hearts, everyone knows whats really going on.”
That they are destroying the currency so stocks can only go up?