11 replies to this topic

[paulstan]

In '99 and early 2000 there were relatively few who had the smarts/wisdom/guts to call the market for what it was (a overextended bubble ready to blow). Today, on the other hand, there is relatively widespread analysis and anticipation of the decline. The elements for a decline are present: stock valuations are extended to historical limits, profit margins at historical highs, consumer debt is huge, real estate softening, and consumer spending slowing, with rising inflation, US dollars tanking, and the list goes on. It seems the liklihood for rising volatility and huge potential downside. What's interesting is how the more widespread anticipation of a market top will unfold. It seems likely that there will be more market participants correctly positioned than in 2000/2001 . . . It seems the common belief is that the bearish participants are helping prop the current market, and will soften the downside when it comes. It seems to me that the larger group positioning (and acting on the downside when it comes) will accelerate the move . . . counter to popular wisdom. This would suggest that being anticipatory will help people catch the move, and waiting until the trend is established will be tougher to implement than in past downturns. I think XD has suggested this as well. Curious what other think? Thoughts?

[skott]

I think the fact that so many people are anticipating a decline that it won't come. only when most think there can't be a decline will it happen. I'm pretty sure you know this already though so your point must be something else. One thing maybe I agree with is being able to get short when the time comes. It could be an overnite thing that crashes in the morning by gapping way down. maybe that will happen....... you have alot of assumptions in there. Stock valuations aren't near what they were in 2000 from what I remember. XD's been short this market for quite some time, hasn't he?

[Mtrader]

indu is so strong. Bearish what? Price is king. Hell with breath, so what if they're stinky

[Gary Smith]

In '99 and early 2000 there were relatively few who had the smarts/wisdom/guts to call the market for what it was (a overextended bubble ready to blow).

I have to strongly disagree with the above. Just about everyone was expecting an imminent top and long before the bubble burst. And the bubble you refer to was only in tech, telecom and media stocks. The eventual March top in 2000 was marked by record and never before seen inflows by the public into stock mutual funds in those sectors. Tops in the past have been accompanied by some sort of frenzy by the public. Right now we aren't even close to such a frenzy. Correct me if I am wrong, but are you are bear trying to rationalize your bearishness while ignoring the action of the market??

[Darris]

Gary, almost as good as 2003 bottom, but we r at a bull market high, LOL.

[jjc]

There is nothing quantitative about this speculation... You asked for thoughts, here are mine:

Sitting around waiting for the big decline is a game few are going to win at, and I won't try to play. That said it seems to me that we will see the SEC and FED tip the scales in their favor by tightening margin requirements on hedge funds before they quietly remove liquidity from the markets (perhaps things will be coordinated with BOJ and it will occur overnight). We see some ground work for this being written about in the media:

http://online.wsj.co...ON=wsjie/6month

These stories are being used to insight fear in the public currently (and perhaps to justify the FED and SEC knowing who has what trade on) however I believe we will see signs of a tightening of margin requirements before liquidity is removed to avoid speculators selling mostly US equities when the margin crunch occurs.

[redfoliage2]

Bubble could go bigger than anticipated and only after it pops it will be realized as a Bubble.

Edited by redfoliage2, 03 May 2007 - 06:35 PM.

[paulstan]

Thanks everyone for your various replies. Interesting to see how others view the current situation relative to the 2000 top. Gary, yes, my bias is plain. I'm not a short-term trader, and am unwilling to be long in the current market (don't trade individual equities, just indices). I also agree with everyone that the market trend will continue until it doesn't. Unlike some I think there is plenty of evidence that the upside from here is limited, but probabilities don't dictate outcomes and I may be surprised. Just as a last note, I view the upside in the market over the past several months as modest . . . it hasn't been a scorch, so I'm not worried in the long-term about missing a few points (my goals and risk tolerance is far more moderate than most on this board). My underlying question (reflecting on it further) was whether most believe the top won't be in until we have a wild, frothy market, with huge late stage public commitment. I think that's where we differ the most. I hope that one last thing we can agree on is that this is certainly an interesting juncture for the market, and for investors worldwide. Thanks everyone, I appreciate the courteous replies and shared opinions.

[robo]

Thanks everyone for your various replies. Interesting to see how others view the current situation relative to the 2000 top. Gary, yes, my bias is plain. I'm not a short-term trader, and am unwilling to be long in the current market (don't trade individual equities, just indices). I also agree with everyone that the market trend will continue until it doesn't. Unlike some I think there is plenty of evidence that the upside from here is limited, but probabilities don't dictate outcomes and I may be surprised. Just as a last note, I view the upside in the market over the past several months as modest . . . it hasn't been a scorch, so I'm not worried in the long-term about missing a few points (my goals and risk tolerance is far more moderate than most on this board).

My underlying question (reflecting on it further) was whether most believe the top won't be in until we have a wild, frothy market, with huge late stage public commitment. I think that's where we differ the most.

I hope that one last thing we can agree on is that this is certainly an interesting juncture for the market, and for investors worldwide. Thanks everyone, I appreciate the courteous replies and shared opinions.

Any thoughts or opinions on this article at the link below.


While scanning the sentiment landscape, I noticed something quite extraordinary.

The latest AAII sentiment measure is showing 54% of respondents as being bearish. By itself, that’s not unusual since we’ve seen numbers like it before. What makes this bearish sentiment historic is that:

Never in the 20 year history of the AAII have we seen such a rise in bearishness coupled with a rising market.

Let me say that again, this has never happened. Whenever we’ve seen such extreme bearishness it has been after a significant market decline and has actually been a reliable signal of the formation of a bottom.

Yet, here we are. The latest survey shows almost 2 times more bears than bulls - after the market has rocketed higher almost everyday.





http://www.tradersna...t-rise-904.html

[paulstan]

The various sentiment measures are what prompted me to kick off this thread. Interesting times, indeed!