Wednesday, January 6, 2010


Today's Barron's Online column was about the growing risk in the stock market even as the trend continues to march, or should I say, scratch higher. Volume is still pathetic and certainly we cannot say demand is forcing prices up. More likely there are simply no bears around to provide supply.

But how can I say risk is growing? Do I even look at the VIX? Of course I do and it is probing the lower levels of the trading range it was in BEFORE the financial crisis.

What me worry? Sorry, Al, you'd better.

Up 70% in nine months is quite overbought. And yes sentiment is quite frothy with Investors Intelligence at records for bullishness.

How about the latest roundup of Wall Street strategist views? The concensus is for 2010 to put in nearly a 10% gain from current levels! The lowest projection was essentially a break even so here, too, there are no bears.

The risk is that stocks are in a bubble and we know how bubbles end.

Again, have I stopped taking my meds? A bubble? What else would you call it when stocks rise 70% in nine months?


paulocuana said...
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William said...

Put/call, DSI, AAII all sentiment indicators at the high end of the range despite a record high in S&P PE and near record low in dividend yield. Bearish momentum divergences, declining volume with declining adv/dec ratio... the list goes on.

I think this period will be displayed in future TA books as a perfect example a stock market that is topping.

William said...
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William said...

Oh, a question Mike, did you see the massive sell offs in many of the Pimco bond funds? Huge moves in almost all of them, between 10 and 20% declines in just a few days... Any thoughts? What might that mean for the over all market? This has mysteriously happened under the radar of the main stream financial media.

Some tickers, PFN PHK PTY PFL

Ramu said...

If its up 70% in nine months...what's wrong with that? Mike, I think there is no sanity left in this market. You were preaching the same thing back in july...what happened?? I think this market will do a 80 or even 100% retracement of all losses.

Quick Takes Pro said...


Its not the amount, its the speed (slope).

Just for context, In 2003, I was on board with the rally all the way until the first peak in 2004. I even got nasty emails from an article I wrote in Barrons (magazine) that said to stick with the rally in October 2003 (IIRC). But that leg was something like 45%, not 70%.