Comments on: BEWARE THE DOUBLE TOP

By: Mike

Mike — Sun, 14 Mar 2010 18:53:34 +0000

I am still looking for a blowoff top but it will be powered from 1120 or so. A couple of days of hard fall to 1120 or so from here will probably get a lot of newbie bears excited to power the next up move. I think this up move will be the impetus for the retail longs to abandon the caution and pile in. Ride it with them but I am still looking for a final exit around May to June. retail longs won’t sell this time until it is too late again.

By: AWF

AWF — Sun, 14 Mar 2010 17:55:44 +0000

What Rosy is identifying are Short Term Double Tops.

Short Term patterns are 50/50 at best nothing to trade or invest on.

On the Other Hand: !!

There is a Long Term Double Top in the S&P500.

The 2000 Top and the 2007 Top.

With the current rally off the Jan 2010 low we MAY be seeing the begining of a Triple Top with the S&P challenging the 1275-1300 range.

1275-1300 is about 10% from here and a reasonable possibility for the S&P for 2010. This makes sense given the stimulus.

To Rosey credit–

He is right when he says this is a techically driven market.

He is right when he says the market is 25% overvalued.

What Rosey might consider doing is identfying the 8yr pattern of Long Term Lows in the S&P500–Next Long Term Low could be due in 2011?

By: boatman

boatman — Sun, 14 Mar 2010 13:30:11 +0000

I AM AT THIS MOMMENT STANDING AND CLAPPING, c smith

By: cc

cc — Sun, 14 Mar 2010 06:38:51 +0000

it seems that most people are getting bullish now…

By: ctm9000

ctm9000 — Sat, 13 Mar 2010 21:03:28 +0000

Rosenberg:
October 2009 – this is it, forming a top
December 2009 – no, this is the top
February 2010 – no really, this is the top
March 2010 – ok, ok, this is really, really it

Eventually, the house of cards will fall and he can say he called it – no offensive to his fundamental analysis

By: LZ

LZ — Sat, 13 Mar 2010 19:58:27 +0000

I side with your comment, but the cruel reality is that it is always prudent people doing right thing who will pay at last.

By: Hootenanny

Hootenanny — Sat, 13 Mar 2010 19:47:02 +0000

Finally a comment with a brain behind it!!!

By: C Smith

C Smith — Sat, 13 Mar 2010 16:55:09 +0000

If investor sentiment does a 180 then the drop will be breathtaking. The new bubble is the bubble of optimism and is being blown bigger by the talking heads and Wall Street “experts”. This could continue in the near-term. The Federal Reserve continues to provide zero percent interest rates and “emergency” measures. Everyone naively assumes there are no long-term consequences to these policies, time will tell. I guess there is no consequence for fiscal/monetary stimulus that has been on the magnitude of 10x Post World War II recessions, either. Kick the can down the road seems to be the motto…..if you close your eyes and dream maybe these problems will just disappear…extend and pretend. The economic recovery is extremely weak, let’s be realistic. The stimulus will fade in the second half of this year and quantitative easing (Fed will apparently supporting mortgage market in 3 weeks) will also be in the rear-view mirror. Everyone forgets that to have healthy and sustainable growth we must de-lever. We can pretend that all of our irresponsible behavior from a leverage standpoint over the last decade will have no consequences and we can pretend like no one is going to take a loss. This can only go for so long.
In the mean time, the markets will keep their “Fast Money” trading mentality, not investing. Everyone is now a “trader”….it is the New York Stock Casino. The Boom-Bust mentality will continue. Rosenberg will be right because the market move is based on artificial measures but the timing of the market fallout is being clouded by the funny money in the system. He has missed the power of stimulus; but the benefits of stimulus are short-term in nature. The hope is that private demand will take the baton back, the evidence does not support the transition will be robust. Assets move in cycles and we have been in an above the long-term valuation using trailing earnings and smoothed out earnings since 1991, briefly going under the long-term average of around 15x in March and then rocketing back up today. Reversion to the mean is coming. There are a number of headwinds (higher taxes, higher interest rates, higher inflation, greater regulation, increasing trade barriers, ongoing credit contraction, unsustainable government debt, state and local government budget crisis, sovereign debt crisis, China’s true strength, etc.)…..that argue the case against the start of the next great bull market but right now it is easy to mistake the start of a sustainable bull market because of the Federal Reserve’s irresponsible policies. The risks are high, the timing of the risks are probably still a ways out. In the near-term we can keep the party going but as we leave the party we are going to drive off a cliff most likely.
The danger is when so many people think the good times are here and you get a shock…everyone will be running for the exits at the same time and it could get ugly.

By: jt26

jt26 — Sat, 13 Mar 2010 16:01:19 +0000

For the big short-term calls (like he is trying to make), liquidity is the prime technical indicator. There seems to be lots of it in credit. There seems to be lots of it in risk equity, although there is some momentum rotation amongst classes. Benchmarks for overvaluation in the market are modest by historical bubble standards so I don’t think we’re in a risk bubble at the moment; maybe a short-term trading bubble … but that seems to be the 2010 consensus anyways … modestly bull/bear trading range.

By: BGray

BGray — Sat, 13 Mar 2010 14:52:45 +0000

Agree. Everyone sees a double top so not likely to happen. Many other indexes have made new highs so it’s only a matter of time before the industrials catch up.