IS THE “CAN’T LOSE” MARKET BACK?
David Tepper says you can’t go wrong buying equities here. The market certainly appears to be in full agreement as stocks have rallied in 12 of the last 18 sessions for a total of 10.4%. This is becoming reminiscent of the April rally when the macro risks appeared abundant and yet equity investors ignored the risks and continued to pile into stocks recklessly. As I was building my first sizable short position in over a year I often referred to this as the “can’t lose market” earlier this year. Of course, we all know how that ended – a 20% decline and a flash crash later and every one of the April stock market bulls was discussing the probability of a double dip. Then, just when everyone appeared most fearful, stocks flipped on the bull switch in early September. That bearish sentiment has cleared and now everyone is bullish and sees no risks on the horizon. Futures this evening are ready to stage another nice bull move. Is the “can’t lose market” back? More importantly, how long does this irrational move last before the herd is once again caught on the wrong side of the trade?
The plan is to kill the dollar, which has been very strong recently.
And guess what, IT’S THE RIGHT PLAN.
Get with the program TPC, get your stocks and commodities going. But check my prior posts brother, I said 50% commitment to the market around 1040.
TPC Said: This is becoming reminiscent of the April rally when the macro risks appeared abundant and yet equity investors ignored the risks and continued to pile into stocks recklessly.
You are correct Sir–
As long as the Buyer of Last Resort(FED)continues to provide liquidity and lay on the Yield Curve–Money has to go somewhere–
I hope the Govrnment will just send everyone some money in the mail–would give new meaning to the phrase “You got Mail”
Just a few notes:
Stock/Bond and Bond/Bond ratios prefers Bonds.
The 10Yr/30yr TR is just to strong.
I have suggested Investors and Traders “Take Profits” in TLT,ZROZ,VUSTX
Some may say thats a “Bad Call”–but I can live with the profits
Some themes one might consider along with stocks
These commodity/currency ETF’s are worth a look DBA,DBC,FXE
IMO, the Fed increasing interventions when the macros are getting worse will always fail eventually. This Feb to April market run up was one. This September one will be another one (even though at this point I cannot predict the top is formed already).
The reason is simple: all the buys, no matter they came from the prop desks, or institutions, or individual all have one goal in mind – ride it and sell into the high as macros do not support the run up. And because of this mentality, there must be a tipping point (like the May flash crash) with strong velocity that no forces can stop.
Put aside the stock market, I think the Fed’s true intention is to cause a global inflation in hope to reduce debt and to re-balance the world trade. This will a long struggle and may last 10 to 20 years to complete. This will be a long painful process and many countries will be losers, China may be one of them.
4 or 5 more trading days and we are there
TPC, so no new short signal for you yet? What do you look for anyways, if it is not proprietary?
well, just like last time there was jack squat in terms of volume. I entered QID on Friday in my IRA since I can’t use margin there, it was only a half position so hopefully if there is more upside then it’s just a gradual float and not another crazy gap up. Good look this week guys.
Be very careful with the leveraged ETF’s like QID: the tracking error vs. the underlying index rises the longer you hold on to it. If you chart QID vs. NASDAQ on a 12 month chart, you will see that whilst NASDAQ is up 10%, QID is down nearly 40% over the same period. Personally, I only use these for short term hedging purposes (no longer than 2 weeks, and that’s probably pushing it).
Since 09/25/09 QID is down -39.36 and NDX is up 20.28%.
Don’t worry, it will be over by mid week.
Matthew – still a believer in the pattern match-up?
Actually, the pattern match-up is nothing more than entertainment (my entertainment to be specific). It is my timing analysis that places an emphasis on the next few days.
It’s been very intrigueing to watch the similarities between time periods. I don’t recall ever seeing two periods so well correlated. But, I suspect that will come to an end within the next few weeks.
Entertainment value is not confidence inspiring speak
What I am trying to say is the correlation between the two time periods is not part of my analysis. I don’t suggest the top will happen Because of the correlation. My analysis is based on other timing factors. Those timing factors suggest a top early this week. I am not confident this top will lead to a breakdown of the trading range just yet. We’ll see.
I am just an insignificant fool. But I refuse to take significant long positions in an equity market that I feel is significantly overvalued. Yet, at the same time, these incomprehensible rallies make me think that I am somehow the patsy at the table (and the same feeling if I just leverage up and go long). Which is why I come back to my foundation of fundamentals and say that I can’t outtrade supercomputers, so i should just be patient and sit on my capital. No one ever told me that investing would be easy, but I often feel like it is a rigged game
On a separate topic, I view much of our domestic politics under the framework of generational attitudes(ie Strauss and Howe). I had a long conversation with my father this afternoon about deficit spending and it surely shook his world view to realize that two negative numbers could not add to zero. ( private and public sectors can not deleverage simultaneously if we are net importers). One question TPC, in practice banks create money. Thus, the federal reserve does not have a monopoly on this. My father kept saying that the govt can not create wealth, to which I replied that the private sector can not create money (yet I was not being totally honest since it has been demonstrated empirically that the private banking sector DOES create money under many circumstances. TPC, how do I square this circle?)
I love talking about deficits because it is the one thing that both parties can agree on–and the hilarious thing is that they are both wrong. I also love talking about generational warfare because I can not imagine a more simultaneously sanctimonious and destructive generation than the baby boomers. Narcissists and sycophants, just get out of the way so that pragmatists cAn run this country instead of idealogues.
Current mkt environment is very similar to last April also on European indexes i.e. S&P printing new highs and Eurostoxx50 struggling to follow…Looking to build a short.
price of testosterone rich ground beef is fixin to fall due to over supply.
watching for TPC to call the short day.
or will ben come out w/QE2 after that whispering midnight call from the whitehouse, sinking the dollar more making stocks appear good just for the sake of the second tuesday in november
The US is being propelled as usual by the Tech Space. Hence it is managing to leave the European markets etc in the dust.
No-one wants an MSFT or WMT as they are too stable / easy to value. So Amazon, Apple etc scream to new highs as there is so much opaqueness to valuation that 10-20% higher is easy enough for someone to justify by just tweaking a DCF
Anyway, watch the Tech Space this October, if it disappoints the market will collapse as we are unlikely to transition from Tech leading us higher to Financials leading us higher
Market often overshoots and HFT (high frequency trading) and CANSLIM traders are running amok. Agree that it reminds me of April blow off peak. Buying double short ETFs may be better trade.
TPC,
Thanks for bringing up this topic.
Just a guess:
1) will end mid of Oct when Q2 started, sell on news
2) or end 11/3: sell on news : election and QE
Just keep on telling myself: Be patient.
Please remember 2009: don’t fight the fed, or you will loose money
Just go long risky assets and let uncle ben do the rest…
many buyer thinks that way, that’s the reason the market is up, but I don’t think it’s a winning thought.
the 2009 rally was due to:
1. extreme panic sell before March
2. companies cutting expenses
3. government stimulus
it started from an under valued market and rallied when companies have significantly better earnings.
it’s not about Uncle Ben and certainly it’s not a similar situation today
You mean Fed PONZI scheme?