BUY THE DIP BECOMES BUY THE RIP….
Investors who have been waiting for a pull-back have been forced to chase the index in recent weeks as the market has been unable to stay in the red for any longer than a few minutes. This evening’s early polling data shows the GOP making big gains in the House and possibly taking the Senate. Wall Street loves the news as it means a return to the good old days of no regulation, low taxes and essentially all the things that helped cause this situation in the first place. Curiously, this has been just about the most widely anticipated event in months if not years so it’s odd to see this rush into risk assets as the news comes out….This was widely expected to be a “sell the news” event, but the early performance on election night shows a strong appetite to chase the performance up here. S&P 500 futures have ripped almost 7 points higher since the close of trading earlier today.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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7 Comments
No one is bearish anymore. We’re gonna gap way up tomorrow. Kind of feels like the beginning of an equity market bubble.
I am becoming increasingly confident about the short side of the trade.
I think there is a very decent chance we are 20-30 points (or less) short of a major top in the process of the market’s ultimate move to its secular low in the next few years.
In the end, the least pronounced scenario – the idea that some major structural event outside of the Fed’s control will reassert itself to complete the cycle – seems like an increasingly likely outcome.
Ferro — I thought to myself what wold be the most outrageous trade I could come up with today given the current environment. On the surface, the dumbest trade would be to short treasuries and go long the dollar. So, with that, I said WTF and bought TBT and UUP. I’m sure there are better ways to play it but it seemed a relatively low beta trade. We’ll see.
We may have a bit of election excitement in the market, and I would expect the bull move to continue at least into the end of the year. But, the market has gone a long way in a short amount of time. Some form of rest is due.
Well TPC – markets do have a feel of late 1999, don’t they? But still even then and in early 2000 we did get sporadic pulbacks. Now, there is NOT even a pullback (of say 3-4%). Do not even think of a correction now. This is what other posts and you call herding. As all are tuned to BUY the next dip (remember what happened to those buying the dip in Mar-Apr? They got slaughtered on a matter of a few days.
I firmly believe that despite the froth short-term the markets will take down with them the bulls as well (as they have taken the bears in the past couple of months). I thought that bears are needed for their liquidity. A world of bulls only will not only be un-healthy but also unstibilizing as well.
Naturaly is time to lean towards the bear’s side, at least for a decent pullback/correction. But as we have seen once again “the powers that be” do not want thinking market participants. They want sheep that herd. They reward them with instant gains and when these people ARE accustumed to this lullaby they throw in a “bear phase” and wipe them out. The herd starts from scatch again. Correct me if I am wrong. It happened in 2000 and in 2007. It should happen in the next year or so again. They only question is how much higher BEFORE the harsh reality stikes back.
C’ est la vie!
The last time I saw the MacD for the DOW this flat for this long was prior to the Flash Crash in May. Get ready for Flash Crash 2.
The buy the rumor, sell the news event is more likely to be based upon the Fed statement and less the election results.