Too much Pessimism and too many shorts.

M

midlifeguy

I think the market is due for a significant turn despite all the bad news. The market is a discounting mechanism. The amount of shorters jumping up and down about how much money they are making is reminding me of the tech bubble. Also, a friend at Fidelity told me on Thurs and Friday, people were calling in saying "I want to sell everything and go to cash".
Not even the FAST MONEY crowd is saying the market will go up now. When nobody thinks the market can
go up and everyone is convinced it is going much lower, that is the time to buy. I think we are overdue for a big rally. It could be the big interest rate cut that triggers it.
 
Quote from midlifeguy:

I think the market is due for a significant turn despite all the bad news. The market is a discounting mechanism. The amount of shorters jumping up and down about how much money they are making is reminding me of the tech bubble. Also, a friend at Fidelity told me on Thurs and Friday, people were calling in saying "I want to sell everything and go to cash".
Not even the FAST MONEY crowd is saying the market will go up now. When nobody thinks the market can
go up and everyone is convinced it is going much lower, that is the time to buy. I think we are overdue for a big rally. It could be the big interest rate cut that triggers it.
More...


i think you aren't too far from the truth...

at S&P = 1295 and S&P earnings at lets say $75 (a 14% decline in earnings from last year), thats a 17.2 forward PE, or a 5.8% earnings yield. Considering 10 yr debt at under 3.5%, I say thats not a horrible return.

In the end it boils down to market dynamics. Yes, everyone is levered up to the hilt in the credit markets (Carlyle at 32:1!!!!) and delevering right now. But is everyone levered up on stocks? I don't think so, and neither do you.

But with that said, the markets can test lower areas just as easily. You still need bad news to not work anymore (to the downside) to give shorts incentive to cover, and up we go.

Today was impressive. I thought we'd be at 1270 for sure... Doesn't look like 1220 is in the immediate sights.
 
Is what we're seeing capitulation? Doesn't look like it. Still too many people saying we're getting close to a bottom. This thread is an example. Maybe a short term reverse is in the offing but I still don't think it has really sunk in yet.
 
This is sort of off topic, but nonetheless related, bear in mind i am still a bit new to all of this, one thing i WAS wondering about is how far does it actually have to drop for it to be considered a drop and not just a secondary move in a larger trend, For instance if i stretch out the sp500 chart to last 20 years the line leading up to 1991ish is flat and then it explods almost exponentially upwards... is this because of the money being worth less then it was 20 years ago + the "growth" factor?

The thesis i have developed for this, ALTHOUGH once again i am fairly new to all this. (and i am taking numbers from a candle chart so my numbers may be slightly off)

81-82 - 140 points to 100 points - lasted about a year and a half - cause i dont know because i wasn't born yet - so all in all a 25% decline over a year and half

87 - 330 to 230 - very brief sell off on black monday - a period of weeks - cause according to internet program trading and various mal decisions with regards to trading... - 30 % drop in the course of 4 weeks

91-92- 390-370????? - so small i had trouble finding it - housing crisis? - 6%drop also short similar to 87 one

98 - 1120-957 - housing/asian crisis - 15% down over 4 weeks

00-02 - 1517-815 - tech bubble+bear market after - 46% drop over 2 years basically

TODAY - highs last November 1545- 1290
17% drop over 5 months so far

So how much further can it drop, this one is apparently caused by financials which have dropped (according to XLF) from may 07 from 37$ to the present 26$ which is ~30%

now unfortunately i am not old enough to go back to the 70s oil and inflation thing so if anyone could enlighten me in that aspect i would greatly appreciate it, how does oil/commodities (besides being a hedge for inflation) and inflation play a part in this drop and in specific when did they peak in relation to the subsequent bottom or reversal in 1970s

one more thought... another interesting thing i noticed is financial's make up about 20% of the sp500 so if you break up the current drop further we can attribute about 4% of the current 16% drop to financials... or 51 points off the highs

now from my understanding every other industry is doing fine and not experiencing any problems (other than the obvious such as high fuel costs for various transportation industries BUT thats just business and the cost gets passed on to the consumer, and believe me as far as gas prices we have it good here in N.A)

Therefore i kind of agree with the people thinking positive... but... the media and all the talk has me thinking negative THAT said i'm gonna give this one some thought over the weekend maybe put some kind of plan forth on Monday...

peace everyone! if i said/explained anythin incorrectly feel free to correct me as i call myself no expert in these matters.

amazing how just months ago we were thinking http://www.macleans.ca/business/companies/article.jsp?content=20080109_103329_103329

and look where we are now LMAO ( i found that article originally in an old magazine which i ironically stumbled upon today...)
 
Quote from Capablanca:

Is what we're seeing capitulation? Doesn't look like it. Still too many people saying we're getting close to a bottom. This thread is an example. Maybe a short term reverse is in the offing but I still don't think it has really sunk in yet.
More...

just interesting, after my previous post, why is it that you think this isn;t the bottom? can you give any concrete reason?
 
Quote from midlifeguy:

I think the market is due for a significant turn despite all the bad news. The market is a discounting mechanism. The amount of shorters jumping up and down about how much money they are making is reminding me of the tech bubble. Also, a friend at Fidelity told me on Thurs and Friday, people were calling in saying "I want to sell everything and go to cash".
Not even the FAST MONEY crowd is saying the market will go up now. When nobody thinks the market can
go up and everyone is convinced it is going much lower, that is the time to buy. I think we are overdue for a big rally. It could be the big interest rate cut that triggers it.
More...


Tell me about the DOOM & GLOOM CROWD of this forum. They outnumber anything else. day trading shorts, mainly tasking on the down side of the market for scalps and grinding pennies.

Negativity is boundless and there is a huge audience of

depressed and desolate dark souls floating just above water..

Tell me about... I have been punching posts since the start of

2008 ...keeping their horns straight..
 
Quote from midlifeguy:

I think the market is due for a significant turn despite all the bad news. The market is a discounting mechanism. The amount of shorters jumping up and down about how much money they are making is reminding me of the tech bubble. Also, a friend at Fidelity told me on Thurs and Friday, people were calling in saying "I want to sell everything and go to cash".
Not even the FAST MONEY crowd is saying the market will go up now. When nobody thinks the market can
go up and everyone is convinced it is going much lower, that is the time to buy. I think we are overdue for a big rally. It could be the big interest rate cut that triggers it.
More...


Technically the market is way oversold.

All 3 major indexes are at lowest stochastics now. All the bad news are out, we had bad job report that did not tank the market to new lows. In fact we did not test Jan 23 rd lows today which surprised me and I think we will test them Monday and than there will be some kind of capitulation. The market has been down 8 sessions in a row and has shaved off 100 points in SPX. Nothing goes down straight. Not even bear markets. Bear markets need rallies, constant diet for doom and gloom bottom fishers.

We will have a reversal and than bears will start shorting rallies on the way up and it may take some time to work back.

Do not forget Fed rate cuts are due by March 18, 20008 or any day sooner at least a 0.50 point to 0.75 point doozie coming up..that will create a relief rally right away.
 
An old man once told me the best time to buy stocks is not when everyone is saying you should buy nor when everyone is saying you should sell; the best time to buy stocks is when half of all people say you should buy and half say you should sell. At least that's how I remember his quote right now.

At this juncture, 1370 seems about as likely as 1270, but beyond that, I wouldn't dare predict anything.
 
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