How’s this for a statistic? In each of the last 6 first trading days of each month, the DOW has gained about 850 points or approximately 42% of the entire 6 month gain. Almost half of our gains since summertime occurred over 6 trading days!
We are now facing the beginning of a new month next week and the markets are attempting to rally off the very first pullback since November. This pullback comes on the heels of a bone-fide extemporaneous event. A real event, not just a fictional financial one. The change in the Middle East’s status quo could bring real change to the economy of the world. Its potential is so big that it could even dwarf Uncle Ben and his digital printing press, but that remains to be seen.
Today the markets are getting the new 401k money to work in the sectors that have been most successful yet have corrected somewhat. Materials, grains, metals, oils, technology and the “annointed ones”. And the rally today looks very similar to past moves–low volume and program driven. The feeling is that any crisis has mostly past and it is time to get back to the all bullish all the time market again. Our near term bounce forecast to SPX 1320 has been mostly met.
With about $200b in QE money still on tap, anything is possible. But as our friend Chess alluded to, something has changed. Volatility and uncertainty are picking up. Very large percentage moves denote uncertainty. And considering how spectacularly extended markets are–as measured by almost any techinical or sentiment-oriented measure–it would be wise to scale back expectations for both directional trading and intermediate-term investing.
This FED-driven market rally is the second biggest and fastest rally in modern history. It’s two year anniversery is coming right up. I doubt that Prechter is right forecasting Dow 1000, but there is way too much new and bullish money flowing through the veins of the market. It sure feels like it is time to do a little real bloodletting.
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Wow…Well said.
Agree with 95% of what you’re saying; however, maybe you meant how spectacularly extended the markets WERE. I can’t find any technical or sentiment indicators that suggest anything is overextended. If you disagree please let me know what you’re looking at. Thanks!
bullish sentiment, option ratios, margin leverage, mutual/hedge fund cash, economic expectations. A little dip in the overbought oscillator means nothing in this market
Great work, Scott.
right back at ya, big guy…
1320 – Nice call. Held my shorts cause of that post. Looking for the bears to hold the line here.
Yawn….Buy buy buy until the end of July!!!!
We just all need to keep believing Joe Lavorgna and all will be well. Unemployment decreasing (just stop counting people), CPI 2% (ex anything humans buy on a regular basis), Big Banks reporting robust earnings (courtesy of the Fed and FASB standards gutting), and high oil prices are an indication of economic health (everyone can easily afford $4 gas). Basically, just BTFD.
According to The Joe on CNBC last week – we’d need $150/bbl oil for a “sustained period”- like a year – for any noteworthy impact on the economy. He is retarded. This is The World According to Joe.” I think The Bernank has implanted one of those bug things in his ear like in Star Trek – Wrath of Khan, so that if he says anything that runs counter to Bernank-speak, he’s inflicted with crippling pain. I know he gives me massive pain listening to his bullshit.
Surely that idiot didn’t say we could handle $150 oil for a year. We probably couldn’t handle it for 15 minutes. That statement is “Asshat of the Week” worthy.
I was watching The Joe on FM earlier this week when I heard it. I was incredulous. Basically, $125-$150 for an extended period is necessary before he’d reduce his GDP outlook. He was also talking about the glorious wonders of 2% core CPI (which it is from an inflation “expectation” / bond mkt standpoint). Someone did briefly challenge him to take the economist hat off for a moment and think about the real world effect in regards to commodity & energy inflation that is in progress, esp since core CPI excludes food & energy, or about anything people buy on a frquent basis. But that discussion went nowhere Fast.
Big ups tomorrow? You probably jinxed that deal with this post.