CAN YOU FEEL THAT?
There are times when the market feels alive. The environment feels like a living breathing organism. It’s times like this that market is often at extremes. The current underlying bid in stocks has an extraordinary feeling of greed. I can just imagine the phones in my old office at Merrill Lynch ringing off the hook as small investors see stocks up AGAIN and call their broker to place a buy order. My former partners are having a great month for sure (great for them at least). Meanwhile, I could hear a pin drop in my office. I can only imagine what I would be hearing if CNBC were on in the background right now. Words like “resilient” and “new highs” come to mind. But the feeling of greed is just screaming at me through the price action I am watching on the screens. Market’s can remain irrational far longer than I can stay solvent and this rally could certainly still have legs, but the feel of this market is one that I want no part of…..
Mr. Market, ah that malevolent beast! Sucking in the heard… weaker dollar –> higher gas prices –> less consumer spending on actual products … instead spending it on gas….and lookie lookie, the gov’t is giving free money begging consumers to buy cars…hey wait, I (the taxpayer) am paying for their new cars!! Not fair! This can’t have a happy ending… could it? A gov’t allocating the resources for maximum efficiency…doesn’t sound like sound Economics to me.
You’ve gotta love these little bumps in the market. We won’t even do a billion shares today and the market gets kicked up 50 points on a 10 minute bump….
Sounds like air underneath that Castle…
We ramp 40 points in 10 minutes and we tank 60 in 10 minutes. All on no volume. This market is just being kicked around. There is no real participation. We’re gonna end negative on the day….
It smell to me like a top, although we are never short on news that saves the bulls. But check the VIX and Yen. also you mentioned no participation in the rising stock market…major resistance at 1000 for the S+P, retailers starting to report next week…not to mention PCE and Retail sales in short order… judging from the surveys (consumer confidence, etc) demand is rolling over after recent gov’t subsidized spending (Goldman and Redmond seem to support this). Finally lets not forget the extreme readings in sentiment …… Thoughts?
I am of the same sentiment. The risk/reward at this level looks very poor to me. Although I am not shorting it I am pseudo short via various instruments. I don’t feel great about an all out short position, but I am testing a new portfolio that is currently aggressively short with a basis of SP 995.
On another note, Pragmatic, what are your other strategies (in your multi-strategy approach) besides macro? Isn’t quant strategies, index or volatility arb, event-driven, merger arbitrage, fixed-income arbitrage, convertible arbitrage, or long short equity? What is the correlation between the returns on different strategies that you use?
I’ll spill my beans.
I’m short energy and Consumer discretionary. Shorted them around 980-990. I figure even if the market ramps up over 1000, reality would have to catch up when there’s finally the realization that a higher stock market is NOT going to get folks spending like in the past (no more Home ATM and credit cards this time) — stocks are already pricing in 2010 earnings when I don’t even think they even have 2H of 2009 correct—. I understand that the gov’t is trying to reflate everything, but I have two issues with that. First, we would get higher oil and raw material prices. This will be at the expense of growth since it would crimp consumer spending as far as gas is concerned, not to mention increase the cost of production for companies (squeezing margins since there is no pricing power for them)….Second is that all the cash that the fed is printing and putting in, is not moving into consumers hands because, surprise surprise, the banks are not lending it (they are like a plugged pipe. one can pour water all they want, but nothing will get to the other side as long as the pipe is plugged)….
I’m betting that sooner or later (next 6 months) poor growth prospects will trounce inflation and growth prospects = a crash.
Finally I”m also taking the view of what happened in the 2002 recession… recession ended, but the market finally bottomed when job losses were nil (I don’t see job losses ending till the end of this year at best). Worse, This time it’s twice as bad as 2002….
If this is the worst recession since the great depression, then why is the market higher now than at this point when the oil crisis in 73 occured? Why would the bear market end when it hasn’t even outlasted the Tech bubble? Seems to me like both those previous recessions were worse than this one…no? I don’t think so.
I figure go with a 6 month time horizon on my positions…. that’s my two cents… or 10…
Sounds to me like you just have an incredible feel for the market because I did not feel that at all and my timing has been nowhere near as good as yours….
I’ve got a bunch of pair trades, overall a bit net short.
consumers: net short discretionary, hedged with long positions in staples and some idiosyncratic discretionaries.
industrials/materials: net short hedged with long positions in ag and preciou metals.
energy: net flat, long nat gas and short oil.
tech: net long, long some with secular stregnths hedged with shorts in some more cyclical techs.
uformula,
The tech bubble crash was lengthened by 6 month to a year by 9/11.
Update for Friday, July 31, 2009; 4:50 PM, Eastern.
[Bottom Line]: A five-wave rally from July 8 counts complete at yesterday’s highs. A three-wave decline is now underway.
This week’s release of the most recent American Association of Individual Investor’s survey (AAII) shows a marked jump in the plurality of bullish respondents over bearish ones. At 16.3 percent, the bull-bear spread is now at its highest level since April-May 2008, when Intermediate wave (2) of Primary wave 1 (circle) was ending. However, the “public” is still not fully on board with the current push, as the bullish percentage remains beneath 50 (it was 47.67). One would think that “Jane and John Q.” will be fully energized as the Primary-degree bear rally nears its end, with the AAII survey challenging or exceeding the highs seen on this chart. But the current reading is compatible with our interpretation of the wave structure, which forecasts a partial retracement of the rise from the July 8 low, labeled (B). When Primary wave 2 (circle) does top, there should be a wide-spread belief in the rallies sustainability.
access chart
Finally in terms of sentiment, newsletter colleague Alan Newman (www.cross-currents.net) today pointed out the burgeoning speculative nature of the current market push. The above chart is our version of a somewhat similar one that he showed his subscribers. The 5-week moving average of NASDAQ-to-NYSE volume has spiked sharply higher as Primary wave 2 (circle) has progressed. The increase in the “speculative intensity” of this rise has recently eclipsed the extreme reading in November 2007, days after the Cycle wave b October peak, as well as the high in January 2001, just prior to a significant down leg in the stock market. While not a short-term timing tool, extremes in this indicator provide context to the degree of “animal spirits” that currently permeate the market, as the volume in higher-beta issues (NASDAQ) spikes relative to lower-beta issues (NYSE). It is perfectly compatible with a turn down in share prices from near current levels.
Jane and John Q public ain’t got no money to invest this time around (or jobs for that matter)
“Finally I”m also taking the view of what happened in the 2002 recession… recession ended, but the market finally bottomed when job losses were nil (I don’t see job losses ending till the end of this year at best). Worse, This time it’s twice as bad as 2002….”
aGREED….mkt bottomed well after recession ended….
retail investors are gonna get crushed again
9/11 had very little effect on the tech bubble crash. The market was above its pre-9/11 level four months after it. The market kept declining because it was still at an irrational high (27x profits).
It bottomed in March 2003 (technically October 2002), in line with the axiom that stocks bottom 3-6 months before complete economic recovery (industrial production, retail sales, employment and incomes all rising). Unemployment, the last of the four, topped out in June 2003.