I remember a few weeks back that the Bears were confident to come out and express their opinion while the Bulls were nervously trying to pick a bottom. At the moment, the Bears have almost disappeared while the Bulls are all over the board saying their upside targets. What will happen next time that some bad news come out ?
Depends upon how you define "bad" and how the market has discounted it.
Do you (Bulls/Bears) that the subprime problem is over and solved in 3 weeks?
I believe that it is largely discounted by the market in 3 weeks, subject to revision.
Do you think that the effect of the Housing problem on the economy has run its course?
No, I believe that it will continue to have a bullish impact on the market for months to come.
Do you really believe the FED saying the problem and its effects are limited? (on the August meeting they said the same thing only for them to come out later and say that the problem is bigger than they thought and that they will do anything necessary to contain it).
I believe that what the Fed says should be ignored by everyone. That way lies madness or worse, losses. Watch what they do.
Yes we are having a good rally from the lows of 16th Aug but still the SPX hasn t closed substantially above the 61.8% retracement since the lows (it closed at 1489 the other day only to open well below the next day).
The reason I am writing this is because with the next decline (if that will come, and I believe it will if today the BOE and ECB do not cut their rates) all the Bears will come out again giving their targets; why don t you do it now and you wait for the market to decline first?
I don't have a new downside target at present and the trend, by my measures is up, though not confirmed.
By the way, have a look at the links below, crash update shows that with another decline it might turn to cash for the SPX and DJI, while trader sentiment is at levels that could spark some panic if we have some bad news.
How well has the "crash indicator" worked, historically? As for my esteemed colleague, his work pretty much mirrors what I'm seeing, though mine has a little more Bullish bias short term. I'd not view his data as supportive of any sort of crash scenario, in particular.
Mark Young
Publisher
The ISA Daily