Short post due to a jam packed weekend.
As we are starting to see 2011 predictions come out they seem to be awfully bullish. After going up 25% in 2009 and what might be 11% in 2010 against a lousy fundamental background where just about every positive number coming through can be attributed at least in part to some sort of desperate action by the Fed or the government I'm not sure where the bullishness comes from.
Given the totality of the situation I can't construct a bullish fundamental case for the US. Don't confuse that with the fact that the market can go up a lot at any time for no reason at all. There was a reason in 2009 as previous to that there had been a truly violent decline and truly violent declines usually retrace some portion of what was lost and do so quickly--I've made this point before, the market action through all of this has not been something new. The market got scared, dropped a lot and retraced a large portion. This is very normal market behavior.
If you want to tell us that the things causing the market action are not normal, then you are making a different point. It might be a true point (I believe it is) but it is a different point.
In terms of trying to figure out what the market might do in 2011, I obviously don't know but it is a good bet that it will not be down a lot. This opinion should not be taken a a bullish argument for domestic equities as down a little is plausible but the opinion that down a lot is unlikely is more about how markets tend to work than anything else.
At 1240 the S&P 500 is at a level that was first reached in January 1999. We are talking about a 12 year, extremely bumpy ride to nowhere. Markets correct not only in price but also time. There is an argument to be made that much of the crisis started being priced in a long time ago--the market is a forward looking indicator at times. Additionally after dropping 50% recently (this after marginally making a new high from 2000) the market is still down 23% from that high.
Again this is not a bullish argument just a consistent belief that while the details have been different the market reactions have not been.
The picture is the square and courthouse in downtown Prescott last night at Acker Music Night a long time tradition on the second Friday in December.
5 comments:
Well,this bull market perhaps defies logic. However, I have developed an indicator that is very accurate on the direction of the market. This indicator toped out in july 2007 and started to turn down and stayed down to july 2009. From july 2009 it turned up and has not yet turned down. So this market will continue to go up the next correction is feb 1 2011.
Jeff from milan, italy
Jeff,
you were bearish earlier this year. Was that bearishness just because you expected a correction?
The 1250 level does look like resistance, we are overbought, and roger is correct that the fundamentals are week. Still we have had a nice run.
A correction would not surprise me here but with extended tax cuts and the fed pushing for asset appreciation the correction may be short lived.
It is getting more interesting
jm2c
jm2c,
Yes from the beg of 2010 I was looking for a correction. First in mid jan 2010, the in late april. In July 24 I wrote:
I intended to post this on july 18,2010:
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Mike C, and Seg,
On 27/5/2010 I posted that this is a correction to a bull market. This correction will go to one of S&P points 1008, 943 or 877. We have met the first objection and the market is still pointing south. I do not think that the 666 S&P bottom will be violated. If it is violated than we are in a cyclical bear market that can last into 2016. What I see for 2010 into 2011 is a correction where one of the above numbers will be a bottom. The market might work sideways, that is it might go up a little then break into lower grounds forming series of triangles. But this correcting pattern will end in 2011. We will then stage the biggest bull market in a sustain basis. Short term, the market might go to 1170 then it will go and make a 1008 low or even 943.
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The 1008 came as a correction but I was looking for a bigger correction. However I did notice that in july the market was going up did not figure that it would go up as high as it has.
Now I have developed an indicator that will give me the market direction so that if there is a short term correction it will be obvious as opposed a big down move like 2007-2009. This indicator is very accurate and am very proud. However I have finished develop this in about a week ago. However, I had posted during the correction that there was an indicator that I was developing that would not turn down. Now I have done a backtest and it is very accurate. Well it is still going up. As to the next high and the start of the next correction it is going to be feb , but as we get closer I can be more accurate.
As far as who has really impressed me - Ritholtz. He has been very accurate.
Best,
Jeff from Milan, Italy
I agree that the strong bullish predications for 2011 appear farfetched.
Too many financial disasters loom on the horizon,impacting too many people.
T
WOW
very good comments in the post and by everyone IMO
I am anticipating a correction, but I do not know how significant.
Unfortunately while there may be a correction (small or large), I have not seen indicators that point to an end of this bull market - yet.
SEG
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