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Key reversal
- Thread starter Lojanica
- Start date
Be ready to buy. After this sell-off. Will likely have several good buy points this summer. One will be in a week or so, another in August.
But then expect stocks to launch.
Equity premium models predicting excess returns for S&P 500 for next five years: NY Fed researchers
May 8, 2013, 11:57 AM
Researchers at the New York Federal Reserve say a study of 29 economic models used to measure the so-called equity premium finds most predict historically high excess returns for the S&P 500 for the next five years.
The so-called equity premium, the expected future return of stocks minus risk free rates for a given period of time, is as high as its ever been, researchers Fernando Duarte and Carlo Rosa wrote.
They studied 29 different models for calculating the premium and came up with a weighted average of 5.4% for Dec. 2012 over the one-month time horizon. Two previous notable peaks were in November 1974, shortly after the end of the gold standard and amid serious stagflation, and in January 2009, in the depths of the unemployment collapse of the great recession.
http://libertystreeteconomics.newyorkfed.org/2013/05/are-stocks-cheap-a-review-of-the-evidence.html
Perhaps not surprisingly, the economists conclude that âthe equity risk premium is high mainly due to exceptionally low Treasury yields at all foreseeable horizons.â
But then expect stocks to launch.
Equity premium models predicting excess returns for S&P 500 for next five years: NY Fed researchers
May 8, 2013, 11:57 AM
Researchers at the New York Federal Reserve say a study of 29 economic models used to measure the so-called equity premium finds most predict historically high excess returns for the S&P 500 for the next five years.
The so-called equity premium, the expected future return of stocks minus risk free rates for a given period of time, is as high as its ever been, researchers Fernando Duarte and Carlo Rosa wrote.
They studied 29 different models for calculating the premium and came up with a weighted average of 5.4% for Dec. 2012 over the one-month time horizon. Two previous notable peaks were in November 1974, shortly after the end of the gold standard and amid serious stagflation, and in January 2009, in the depths of the unemployment collapse of the great recession.
http://libertystreeteconomics.newyorkfed.org/2013/05/are-stocks-cheap-a-review-of-the-evidence.html
Perhaps not surprisingly, the economists conclude that âthe equity risk premium is high mainly due to exceptionally low Treasury yields at all foreseeable horizons.â
Funny how this morning was armageddon and now it's buy, buy, buy.
I would think given the steep nature of the sell-off there will be time to establish a bottom. I think we have a double bottom with 4-8 weeks between the two bottoms and a sideways rising then falling period between the two then setting up the ramp into the end of year.
I would think given the steep nature of the sell-off there will be time to establish a bottom. I think we have a double bottom with 4-8 weeks between the two bottoms and a sideways rising then falling period between the two then setting up the ramp into the end of year.
Today was an interesting day in SP500. A significant gap lower on Asia's weakness. Continued selling but at modest volume to support at 1560ish all morning. We did break below another barrier 1575-1580. We rallied hard all afternoon and almost reached the zero line before giving up most gains into the close.
Takehome: Some participants started buying. Net selling overall. No bottom yet.
Takehome: Some participants started buying. Net selling overall. No bottom yet.
Quote from Lojanica:
Today was an interesting day in SP500. A significant gap lower on Asia's weakness. Continued selling but at modest volume to support at 1560ish all morning. We did break below another barrier 1575-1580. We rallied hard all afternoon and almost reached the zero line before giving up most gains into the close.
Takehome: Some participants started buying. Net selling overall. No bottom yet.
TSX down 8% from the top. I'm patiently awaiting a bottom to be established. A fund manager on the tube today confirmed my thinking, that the TSX is oversold, except the mining stocks that could free fall more all year. He said they aren't buying anything YET but they are covering all their shorts.
Two weeks ago someone said they thought the bull market channel on SPX had support around 1550 area and unless that breaks the channel still has potential life. I suspect if it breaks it will be premarket some day, cause some short term panic in both markets again and maybe a nice entry point to go long when the dust settles.
i am not right or wrong i just saw this movie before but they always have new titles. the financial community never comes out and tells you to sell at highs. they are just nice people with smiles on their faces who give you free advice and get paid well from the banks who have nothing but your best interest at heart of course. big sell offs and gap downs are how bear markets begin. i know someone will attack me for saying we are going into a bear market and that's not what i said i am just saying its a sign you see at the start of one.
i find the economy poor after 4 years of fed money. i don't understand the logic behind the fed either but i know the fed is on the markets side.
i find the economy poor after 4 years of fed money. i don't understand the logic behind the fed either but i know the fed is on the markets side.
Quote from Lojanica:
Broker boy got it right. Big gap down. This certainly looks more and more like a deflationary start even if it is self-fulfilling. We've had two big unfilled gaps to the downside which means there are no buyers (yet?)
Quote from Lojanica:
Funny how this morning was armageddon and now it's buy, buy, buy.
I would think given the steep nature of the sell-off there will be time to establish a bottom. I think we have a double bottom with 4-8 weeks between the two bottoms and a sideways rising then falling period between the two then setting up the ramp into the end of year.
Quote from brokerboy:
i am not right or wrong i just saw this movie before but they always have new titles. the financial community never comes out and tells you to sell at highs. they are just nice people with smiles on their faces who give you free advice and get paid well from the banks who have nothing but your best interest at heart of course. big sell offs and gap downs are how bear markets begin. i know someone will attack me for saying we are going into a bear market and that's not what i said i am just saying its a sign you see at the start of one.
i find the economy poor after 4 years of fed money. i don't understand the logic behind the fed either but i know the fed is on the markets side.
You seem forever wrapped up in conspiracy theories and calling for massive drops in US markets. You are not alone on this site doing that.
Try this for a change. You said you shorted the S&P, but when it went against you for a while, the claim was it was a small position, and that markets are "crazy". Fine, but this is a trading section. So what is most important to us is not that you are short, or that you anticipate massive financial bloodbath in the US at some point in the future. The important item is your exit strategy on this trade. What is your plan ? Do you even have a plan ?
Today is a "rebalancing" day. Spastic fit gaps to suck money from newly positioned money as they puke with a little pressure.
Don't be fooled. Most of the gaps are to be faded unlike the two runaway gaps at the beginning of the move.
That's why some argue that trading is hard and that discretionary trading is crap not rules based. True but it is music which is math based not architecture. Subtlety is everything. The difference between a great musical composition and run of the mill noise.
Can you tell I'm a little bored here.
BTW GRPN is gonna sky
Don't be fooled. Most of the gaps are to be faded unlike the two runaway gaps at the beginning of the move.
That's why some argue that trading is hard and that discretionary trading is crap not rules based. True but it is music which is math based not architecture. Subtlety is everything. The difference between a great musical composition and run of the mill noise.
Can you tell I'm a little bored here.
BTW GRPN is gonna sky
Quote from brokerboy:
i find the economy poor after 4 years of fed money. i don't understand the logic behind the fed either but i know the fed is on the markets side.
True. One of the things that confounded so many traders was "Why is the market climbing when we are in a recession?"
The world's CB's coordinated an expansion of credit to counteract the deflationary forces at hand.
Now with interest rates bottomed out (end of a 30 year bond bull market) and the commodities market blowing off their bubbly excesses the only safe haven is gonna be cash and equities. So sure it doesn't make sense but I'd say the dips should continue to be bought but not the shallow dips the big fear induced routs like over the last 30 days. Once everyone realizes the sun will rise tomorrow and that they are gonna lose money in bonds and that cash has a negative expectancy due to inflation then guess what the equities market will take off.
Maybe, maybe not and that is what makes a market.
Does anyone really think the FED is gonna pull the plug? Tapering means that less stimulus not no stimulus.
Look at the 70's for jagged markets.
This could go on for years with sell-offs in the 10-20% range and then refilling, hitting the last high or just short or a little higher then retracing. Understanding the macro helps delineate a decent strategy then understanding the micro aids in positioning