I think the positive case for the market in the relative short term is reasonable.
(1) We've had a nice correction - cleared technically overbought condition.
(2) The Fed has affirmed "exceptionally low rates for an extended period" - go for it, boys.
(3) The only thing we have an oversupply of right now is doom and gloom - great for climbing that wall of worry and catching people on the sidelines.
(4) Earnings and revenues have been solid leading to positive revisions - got 4Q09 earnings season out of the way, now let us party in the vacuum.
(5) Market valuation is looking very attractive in the context of recovery - come on in the waters fine.
(6) 1H10 GDP has a decent chance of surprising on the upside.
(7) ZIRP drives incentives and therefore market behavior - banks got to do something with that cash.
(8) At some point, the retailees who went to bonds and missed the move will convince themselves that it is safe to get back in - liquidity filip.
(9) EU won't let Greece spoil the party.
(10) Oh yeah. There is more fiscal stimulus from last year due to hit.
And so, although it grates against my bigger picture outlook, I think there is a decent chance we could get a pretty substantial rally. But if it does rally strongly, it sets up a good fade and short.
Showing posts with label rally. Show all posts
Showing posts with label rally. Show all posts
Friday, February 26, 2010
Friday, September 25, 2009
We need a pullback, BUT...
In my opinion, the market needs a pullback, BUT this is a buy the dip market.
I don't think we're going to see a 20%+ decline, however much this would cleanse bullish ardors. If we're lucky, we'll get a 10%-15% correction, then it is off the races again (maybe not quite the races, but a 1200 target on the S&P 500).
The time to sell this market will be when the authorities try to pass the baton from the public sector to the private sector. That is not likely to happen before the middle of 2010 for monetary authorities and may never happen on the fiscal side of the ledger (just a little tongue in cheek). The critical point will be to anticipate when the market is going to get antsy about the transition (it may be six months beforehand, it may be longer or shorter).
Note: Geopolitical uncertainty brought about by an attack on Iran by Israel, a large terrorist attack on US soil, or heightened trade tensions could throw a spanner in the works.
I don't think we're going to see a 20%+ decline, however much this would cleanse bullish ardors. If we're lucky, we'll get a 10%-15% correction, then it is off the races again (maybe not quite the races, but a 1200 target on the S&P 500).
The time to sell this market will be when the authorities try to pass the baton from the public sector to the private sector. That is not likely to happen before the middle of 2010 for monetary authorities and may never happen on the fiscal side of the ledger (just a little tongue in cheek). The critical point will be to anticipate when the market is going to get antsy about the transition (it may be six months beforehand, it may be longer or shorter).
Note: Geopolitical uncertainty brought about by an attack on Iran by Israel, a large terrorist attack on US soil, or heightened trade tensions could throw a spanner in the works.
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