Wednesday, August 5, 2009

This deserves its own post

I generally do not cross link here but this is quite funny.


  1. bears got the shaft again. Quite incredible. Wonder if this is going to close in the greens today. If it does it will make it a 3rd consecutive close above 1000 on SPX which is quite significant and should lead to more upside on the mid term.

  2. The people behind "the computers" won't let it fall I tell ya. Even if it is going back down in the latter part of the year, it will be in a controlled manner. I am by no means any expert, just my theory of how the world works. The government has enough power and resources to, and they will, prevent the marking from tanking. They will bring it to, and keep it at whatever level they need it to be, for a certain period of time to suite their "strategy" of recovery.

    But, I personally do believe that the market will go back down because the reality of this poor economic condition will slowly be realized over time and will be reflected in Q3 and Q4 data.

    I am long now, but will be slowly adding short positions throughout August, hoping the decline will start after labor day. But again, not looking for a cliff dive, just hoping to profit from a slow decline.

  3. Ok here is another way to look at it. We have known for a while now that market manipulation exists. Whether its here, last year, last decade, it has always been there. Now the question remains, where was this manipulation last year when we dropped 50%? Could they not have made this an orderly decline? Of course we had to deal with a huge amount of negative information and many investors were spooked and exited positions - ok crash was over with. Why did we make a new low? Why did they not step back in at the 764 levels of our previous bottom?

    I 100% agree that at this point NOTHING is pointing to a decline, the only justification you can have is that what goes up must come down. Otherwise there are no clear signs of weakness in the market place.

    While we have declining volume the markets continue going higher, no one can ignore that. Will we see a crash again? The chances of 2 crashes like the october one within even a decade are very unlikly. Will we see a decline to make a new low on all indexes? I still firmly believe that as the problems we are dealing with are much more severe then the current short term thinking on earnings.

    Additionally, I also agree 100% on the sandbagged earnings that are being beaten and the total lack of reality. Someone once said that after a major bubble bursts, during its unwinding another mini bubble will form, in our case a bubble through govt spending/debt. Once that last bubbles bursts as well it will finally resolve the first bubble that was responsible for the need to have another bubble - in summary you have a net effect of the first bubble finally unwinding with the addition of the second mini bubble bursting as well.

    I could go on here and talk for the next hour or so about my fundamental views and why they are so out of line with our current market environment. Maybe I will spend some time this week at night to write up another larger post about this =)

  4. The other thing to consider is our current level of market manipulation we are seeing here. Could this be a new era? Through more advanced computing and the close involvement of the govt in the financial markets (I feel almost more then ever before) - could we be at a point where the entire stock market is just a machine driven by a selected few?

    Looking at wealth that is invested into this market place. Look at it from the middle class perspective, people that have their life savings invested into 401K's, retirement accounts, etc. If that wealth were to disappear someone is left holding the bag - the govt. They know that - so why not avoid this from happening as we are already stretching our spending to a point of "no recovery". Could we take the hit of having another HUGE liability on our hands? the entire middle class whose savings have been evaporated?

    Ok sorry turning almost philosophical now here, I'll stop but there is a lot more in my head waiting to come out =)

  5. Lately I have been trying to step back and think simple, the "KISS" principle - Keep It Simple Stupid.

    The way I see it, this housing bubble expanded (if not started) and busted in the Bush years. The Bush administration have ignored this (just like global warming) and never believed that the bubble existed, never mind the potential of it blowing up. A lot of economists, and perhaps "smart money" saw it coming, but the people who actually have power and resources did not. It was too late for them to react. The government is after all, still human. And the man in charge wasn't that bright of one.

    Simply put, I think the crash happened because the market reacted faster than the government could. Without precautionary measures ahead of time, there was nothing the government could have done (maybe except to halt the whole thing) to save that drop.

    Now, given time, they can and will continue to use all their power and resources to control the market and cushion the fall, which I believe will inevitably come, and they know it.

  6. Imagine this: Starting now, NO ONE puts money into the markets. Whatever is in, is in. Which way will the market go? The computers will trade amongst themselves with their designed algorithms, in such a way that they CAN GROW this money. It will not be flat, it will not go down, the only way is up. If there are no human decisions involved, given time, the market will only go up.

  7. 100% agree. Given the low volume we are seeing here the only participation is limited to short covering and "dumb money" buying.

    Now as I had mentioned in my other post, the money thats in is in, however, we are on the edge of having to deal with a lot of overhead supply. Long term positions that have been brought back to break even through margin or leverage or positions that are finally starting to see positives again.

    The first step is sector rotation which we have seen quite a bit in the form of commodities, financials, technology. The other thing is another step of de-leveraging and minimizing risk exposure. Even smart money is concerned for the pull back and they do not want to be the last ones to exit out of those now profitable or close to break even positions.

    Now I could be very wrong and mutual funds and other larger investors remain completely invested in the market, not because they believe it will keep on going up BUT because of pressure from money inflow, money that wants to invest and the need to stay invested in the market. The end result of this would be continued buying and signs of sector rotation in an uptrend.

    This is becoming more and more obvious now as all sectors are showing relative strength here without any significant pull backs or sell offs anywhere.

    I really do not know what to make of this market at the moment. I tend to over analyse and then end up at a draw with the only difference of my personal views being bearish so of course I favor the bearish cases. However, there are too many bullish signs and a total lack of assumed bearish moves that have yet to materialize.

    No choice but to remain on the sidelines, trade small, and keep it light. Even today, as we saw a LOT of sell volume that pull back has completely disappeared. Volume wise we have seen more "selling" today then buying yet we are moving back up.

    Take a look at the volume in the first hour and look at price relation (price to volume). Now take a look at the afternoon, same price but less volume as the real volume is almost non-existent and all we are seeing are computers trading back and forth to get the prices higher.

  8. Look at it go... I mean, com'on. You can't fight that.

    I also think that when the general public sees this kind of action, they too want to get in on it. It's just human nature. However, they are only small money. Until the powers that be with the big money want/need it to come down, it won't happen.