STOCKS AT RESISTANCE: CAN WE GET A CATALYST?
As we sit at major technical resistance after a record setting 3 month rise, stocks look gassed. Consensus has moved from wildly bearish in early March to wildly bullish as of now. Not even the Nouriel Roubini’s of the world are against “buying any dips”. But as the stock market bulls gear up and await the white knight who will ride in and buy from them at higher prices we find a market that is missing a key ingredient: a catalyst.
See, the beauty of the government induced rally was the way in which they lined up a sequence of events that kept investors buying in anticipation of an event. As I’ve said before, I don’t believe stocks discount out nearly as far as most people believe they do. Because of the earnings game, the stock market has turned into a “one quarter atta time” game. You might own the best stock in the world with the best long-term outlook, but if they miss and guide down you’re bleeding red. Until earnings ramp up in a few months it’s hard to find a good positive catalyst to cling onto.
Stocks need a catalyst to look forward to and after a great run and a series of fantastic catalysts it looks like this market might be all dressed up with nowhere to go.
TPC, hey, how’s your shorts doing?? hahaha. good to swim against the stream. I bought SRS and SKF after hours, SKF I will hold for 10% either way. SRS is just a day trade.
However, as to your point on catalysts, on Friday we will confirm that we are almost .5 above the 9.1% UE rate predicted by the Fed. So, for the next two days, I think the main driver overall is going to be the UE rates. That is real and cannot be ignored.
Plus, bulls can tell themselves they needed a pullback anyway.
Are you fucking kidding me, how many times can the close be manipulated. This is one hell of a sick market. Imho.
Prescient, as I’ve written before, tops aren’t an event. I don’t think everyone has a good grasp on just how slow this recovery is going to be. Check out my post below on what has changed on Wall Street. We’ve got bigger banks and all the same problems….
I guess what is bothering me the most about this rally and all the “Greenshoot” propaganda is the lack of commonsense. Of course, I could be the one that doesn’t have it. I guess I just don’t understand how the consumer is going to create GDP growth in the third quarter. If it is true that 1 in 8 homes are in trouble with their mortgage and the amount of job losses are going to continue well past 10 percent at this point and 32 million people collect foodstamps and savings rates are bulking up; where is the money gonna come from. I heard one analyst actually say that the consumer isn’t as important as you might think and says that we can have solid growth without the consumer spending much. I guess the only thing I can think of is that people truly think that this market can never hit 6400 DOW again so why sell. I am also wondering if your Short position is for of a daytrade move or longer term.
Tony,
you have to keep perspective too. We are barely positive for the year. That’s a poor 5 month total return in any year. We’re still 40% off the highs.
I am basically betting that the financials will fail to break the 200 day. If they do I’ll likely re-evaluate, but it looks good for now. We’ll see how things develop. I could get hammered in the next few weeks and I could do okay. I don’t like to put a timeframe on my trades. But I do know I’ll get out if it start getting ugly….
There is a prevailing bullish sentiment at the moment that certainly could cloud one’s judgement…..I confess that I am confused.
TPC,
I agree, and that’s why I’ll keep that 10% stop on SKF, but here’s my thought. Did you read that T2 paper, very persuasive and reflects my opinion and what I see happening.
In a nutshell, the financial system almost collapsed and we have had $1.2T of losses and raised $1T of capital. According to all analyses, we are 33% done on losses. 33%!!!!!!!!! The yield curve can only be manipulated in banks favor as they have done so far, for so long, and even BB and TTT are signaling that something needs to be done to restore the dollar’s strength. Thus the banks ridiculously profitable borrowing is coming to an end.
The FDIC apparently has wised up to the bullshit the banks were trying to pull via PPIP and has DISCONTINUED that sham of a program, most likely when the FDIC said you shall not sell assets and buy assets, i.e., the banks could not set up downstreamed LLCs and buy money with fucking TARP CAPITAL!! or use some other straw/front man to clean their books on our dime, the FDIC killed the PPIP.
Friday we are going to learn that UE hit at least 9.3% and all of the dealer/GM/Chrysler UE is still in the pipeline. Big numbers still to come on jobs.
And finally, we get to the inevitable super-dilution in financials, which have experienced a rocket-ship of appreciation on green shoots consisting of 1) PPIP – a plan that has been cancelled; 2) one time trading profits sucking AIG dry; and 3) free money that soon will end as a necessity.
Combine that with the fact that those clowns are repaying the TARP and thus HAVE BURNED THE BRIDGE OF GOVERNMENT SAFETY NET and taxpayers have no more stomach for yet another fucking bailout of these banksters, and there is a volatile mix of shit coming down the way.
Now I may get stopped out of SKF just for shits and giggles, but I think that we have yet to see the end of financials’ decline. WFC will be cut in half, at the very least.
So I’m playing it for now, hopefully with a profitable stop and SKF still keeps going up. Who knows, financials will probably rally another 100% from here, but a retarded braindead monkey can figure out that something is wrong with the so-called stress tests if the UE rate for THE ENTIRE YEAR is already breached in May!!!! With millions more losses to come and nobody is frigging hiring.
That combined with the fact that banks’ assets are deflating in the double digits every Q, what do you think is going to happen?? BB could literally drop billions from the fucking helicopter and it still would not inflate RE or CRE, THERE IS NO WAY!! So some oil trader might be getting rich off the perception of inflation, or some gold bug, but Joe sixpack is still trying to figure out how to pay his mortgage with no job or how he is going to pay for college since his salary was cut or how much he should save since 1/3 of his friends have lost their job or are in fear of losing their job, or how and when he can pay of his $7k in credit card debt…
We are going to hit 11.5% UE by the end of the year, at the very least. So, in short, I agree with your position that financials are going down. I hope that I have timed this right. In the short term, meaning jobless claims and May UE numbers Thu-Fri, imho, this market is ripe for a big fucking selloff.
Just keep JPM/GS off the SPYs near the last 5 minutes of every day, can we, and at least pretend this is a free market and country, instead of some bullshit banana republic.
Prescient, I am with you. I’ve been banging the same drum for two years. I don’t think we’re gonna fall off a cliff any time soon, but I don’t see this economy going anywhere for years….
What made me wary of this rally all along is that it was almost like someone was holding bait over the markets bidding us to come in…it was weird…still is. With the obvious manipulation going on at the end of the day.
UK stress test paramaters have already been exceeded. have yet to look at EU stress tests but assume at this stage they were not rigorous. am watching for end of capital raisings by top 20 banks and expect that to signal downside risk.
Once JPM and GS have their TARP restraints removed, will they have the need to assist the G’ment with it’s fabricated rally of shooting green bubbles?
The catalyst may be the removal of artificial life support. This may even become a forced event.
Once JPM and GS have their TARP restraints removed, will they have the need to assist the G’ment with it’s fabricated rally of shooting green bubbles?
The catalyst may be the removal of artificial life support. This may even become a forced event.
OH! You’re my new favorite blogger fyi
Thanks BBQ!
I’m no conspiracy theorist, but I am quite certain the government will do everything in their power to avoid a financial collapse. If that involves using specific firms for specific market intervention then yes, you are correct….
Thanks for the nice compliments!
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