Small cap stocks are at new recovery highs and the Dow is breaking through resistance! Interest rates are still sooo low and retail sales are hot, hot, hot!I think I just threw up in my mouth. Yes, all of that is true but those happy exclamation points are making we woozy. Are things really that good? Well, stock market investors think so. I better tell my wife she can quit her job and make me a sandwich.
The chart of the VIX above shows it at "support" going back to the 2008 fun years. Apparently, all is forgiven.
While I cannot deny the market's trend and resilience, I just do not see how any analysis - technical or fundamental - justifies the feelings of secular bull market.
6 comments:
I agree with you and remain short, although it is hard to do. I just keep reminding myself of the gathering macroeconomic clouds and remain steadfast. I look to you to keep providing good technical analysis that I don't always come up with myself. Need a trader?
Steven,
The problem with remaining short is that you are losing money. Believe it or not, despite my bearish leanings, I actually have more long positions in the newsletter than shorts.
I think the longer this goes on the uglier it will be when the cows come home (call me Dr. Phil).
Maybe still its not a bad idea to go long on some leaders AAPL, AMZN and JPM. Since, you feel like throwing up looking at investors optimism, thats when I think there is still some juice left (of course, with a tight stop).
"When you make a trade and you feel like throwing up on the keyboard..then u know u made a good trade"
The resulting action in the markets is a function of both technicals and fundamentals. Whichever is stronger at the time exerts more pressure on the result. As of now, and even for the last few months (probably since last October), fundamentals are exerting pressure. Look at capacity utilization - it has been creaping up slowly every month for the last few months - even though manufacturing is a paltry 20% of the economy, it is still an indicator of general health of the economy. The consumers can complain all we want, and we usually do - that's our nature, but we still end up buying. And as of now, the industrials are buying from each other to rebuild. Plot, XLI, XLP, XLY and SPY from the correction bottom of Feb 8, and you'll see some interesting results. Then do the same from Oct 30, and finally July 8.
At some point the technicals will take over - the question is when...
Flipped long at 1133.75 (shrug).
Even the hedge in the garden is blooming, for the first time in eight years.
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