Kudos to MMs
- Thread starter nitro
- Start date
I like this line of thinking, twice in the past couple months i have mentioned to you that i thought we had topped, only to be proven dead wrong within a couple days. I have started to analyse it, and i think that big money is thinking precisely along these lines, and siimply buying because earnings right now are higher then they have ever been. I still think what is happening is unsustainable thoug, real unemployment can not keep going up forever at the same time corporate earnings are going up.
I still think alot of trouble is coming this year, in that there is state/local budget shortfalls and cuts in government spending which are going to be inevitable all over the place now that the stimulus money has ran out, but i think that for the time being big money obviously thinks that we should be over 1500 because earnings are higher than they were last time we were there.
One thing is for sure, this is by far the most stubborn bull market I have ever seen. Any kind of gap down is bought up instantly, any dip is bought instantly, the market isnt even allowed to retrace for a frigging day in this market, we had 1 solid retracement day when all the stuff with Mubarak started but that was really the only one i can think of.
I still think alot of trouble is coming this year, in that there is state/local budget shortfalls and cuts in government spending which are going to be inevitable all over the place now that the stimulus money has ran out, but i think that for the time being big money obviously thinks that we should be over 1500 because earnings are higher than they were last time we were there.
One thing is for sure, this is by far the most stubborn bull market I have ever seen. Any kind of gap down is bought up instantly, any dip is bought instantly, the market isnt even allowed to retrace for a frigging day in this market, we had 1 solid retracement day when all the stuff with Mubarak started but that was really the only one i can think of.
Nitro, if the market have more people want to buy compare to amount of people that want to sell, the price is up, true?
And poster traderm1m2 I do not care if you think my question is stupid.
And poster traderm1m2 I do not care if you think my question is stupid.
That's a simple question. Investors do not buy a companys stock for last quarters earnings they buy it for next quarters I.e. growth. For the last year input costs have risen as seen by the ppi yet companies have eaten most of these costs. However now prices really are getting out of hand with cotton , copper , oil and gas and its a guarantee that margins will shrink and prices will go up. Once they do then stock prices will not look as attractive. Inflation will bring down these record 9% margins.
The commodity price bubble has not fully been felt yet.
I think there are many things driving this market, all of which are legit. I've said this before on many other threads and I know people roll their eyes when anyone says this, but when you price the s&p in gold, we are still sitting on the march 09 lows. We haven't even rallied yet. This is important to note because it reminds us that a lot of this rally has been driven by a weak dollar. The question I would ask Nitro or anyone else making the case for a much lower s&p is, would you buy the dollar at these levels and hold it for say 3 to 5 years. Would you? I know I wouldn't. But if you are shorting the spoos, that is exactly what you are doing.
Let me bring up another point. When making the comparison to where we were in march of 2000 when the spoos where at 1550, our economy was primarily domestically driven. In fact you could argue it was silicon valley driven. The s&p 500, dow and even the nasdaq now are actually international indices. All of our growth is being driven not from the US but from overseas. Corporations are sitting on a record amount of cash. Over 2 trillion dollars. And where is that cash likely to go? To wherever the growth is. That will only drive this market higher.
I bring this up because citing high unemployment rates, us debt, over sized government, these ironically are factors driving international growth if you think about it and therefore driven our market higher. The worse it gets job wise in this country, the higher the market will go. Why? Because it means capital will be leaving the US where it's stale and held down by high taxes and regulations and will actually move to areas of high growth in other parts of the world. And since most large cap companies in the US are in those areas, those stock prices will be driven higher.
Next point I'll bring up to Nitro or anyone else making the bear case is, if you pull your money out of stocks, then where do you suggest putting it? In Bonds? In Gold? In CD's? Under the mattress? The fact of the matter is the s&p dividend yield is at record lows to bond yields. Never in history have we seen a major selloff under these circumstances.
Last comparison I'll make to 2000 is that rally was very concentrated in tech. This rally has been incredibly broad and diverse. The transports are making new highs, retail is strong, discretionary spending stocks, chip stocks, energy, metals, automotive, you name it. It's very hard to take the market substantially lower with such broad participation.
Then thrown in the fact that by and large, most people missed this rally. Sure they have been long early, then got out. Or they are just getting in now or maybe they caught the middle. But we are seeing record underperformance by mutual funds.
Everyone wants this market to go lower. The bears, the bulls, long term investors, mutual funds, even our government. Nobody wants this market to go higher.
Now do I think we are "technically" overbought? Sure, we could use a 3% to 5% pullback or even a 3 to 5 month sideways consolidation. I think both of those are on the table. But for Nitro or anyone else to be making a "fundamental" case for lower stock prices simply does not have the data or statistics to back them up.
As traders, we all get paid on price, not on opinions or fundamentals. We trade price. And price is going higher. I think Nitro is a very bright guy. But he has a weakness and it's a deadly one as a trader. Almost dogmatic. He is not willing to "protect" his capital, or investors capital, whatever it may be. As traders, we all have a fiduciary responsibility to ourselves and our family that we protect our capital first and make money second. This business is full or very bright people who are broke and destitute because they failed to protect their capital. This should be the primary concern, not where the fair value of the s&p is.
We trade price and our responsibility is to protect our capital first, and make money second. Period.
BTW...Mav I read some of your posts on the classic tape reading thread about 4 years ago when I first started in this business and it helped me out a lot. Thanks.