This market has all the action of a KC and the Sunshine Band (whoo!) concert.They are finding quotes from people who are saying they've never seen anything like this.
Maybe that's true maybe it's not but it is unimportant.
While I discount no possibility, this sort of manic willingness to take prices big, I mean really big, in either direction is a sign of a lot of emotion which is not consistent with bear market bottoms.
I would expect there to be despair at the bottom. In March 2003 people did not believe the move, right now it seems like many people are really buying in emotionally.
I have talked repeatedly about not zeroing out of equities because just because there is no way I think the bottom is in I could be wrong and to repeat, lagging a monster rally (if that is what this turns into) is a whole lot better than missing it.
13 comments:
If you look at the LTCM crises in 1998, this is somewhat similar on the charts, and then it was the bottom.
you are comparing a V shaped panic to a U shaped bear market.
I don;t think that is an apples to apples.
There has been a lot of bearishness out there. Lots of put buying.
So a lot of volatility and some nice rallies should not be surprising. Is this a near term tradeable bottom? I wish it had gone lower, but it could be. Although I do not trust things here up or down.
I think the volatility continues and eventually I think we head back down, but it has not been clear to me and it may stay that way for a while.
As for lagging this up move yes I think I have gone down around 1% maybe a little more for the week. But I am still up around 8% for the year. Most of the mortgage resets still need to take place. Nobody knows how bad the debt write offs will be yet. We are still closer to the beginning of the debt write offs than the end.
Sorry but I do not view a high cash position as a negative right now. Although I grant you I may look stupid if I do not change my position when we do reach a trade able or actual bottom.
seg
I wonder how much of this is emotion and how much of it is that the market is so much more liquid than in decades past, and investors (like hedge funds, etc.) make much much bigger bets.
I'm not only lagging the move up, my commodities are getting pasted, and my cash is earning less everyday. I think I'm at the Lettermen concert!
I do not agree that the market is more liquid. More emotional - YES.
Information and rumors seems to be a problem as well
I suspect the market will continue struggling to get a upward foothold while bad news continues to appear in financial (BSC) and finance related issues (CIT's apparent inability to get an credit).
"CIT Group, the largest independent commercial finance company in the US, on Thursday said it drew on $7.3bn in emergency credit lines and may sell assets to meet funding requirements."
Cash, bonds or equities with a cash surplus appear to be the the few safe places to be. I thought a good way to stay in would be a low cost index fund until I look at their portfolio of 17% in financials, then I have second thoughts.
"this sort of manic willingness to take prices big...is not consistent with bear market bottoms."
Roger, I'm not exactly sure what you mean by that comment, but high price volatility (in both directions) is usually a sign of a bottom. Here is one illustration using ATR: http://tinyurl.com/34z4b7
Mark Hulbert also did a write up on another bullish indicator - the "manic willingness" manifest in the double-nine-to-one signal we saw on Tuesday: http://tinyurl.com/39w5n7
I'm pretty confident we saw a bottom on Monday. Probably not THE bottom, but A bottom. This very normal for a normal bear market :-)
i am refering to the bottom, not a feel good rally.
IMO, if you spread out the chart a little the volatility now seems to be a lot more than during Q1 03 and like wise q4 1990 but i may be seeing that incorrectly.
Re 90/10 i think i read some where that the track record for these in a bear market is not so great (maybe that was from Bespoke)?
October 2002 was the end of the last bear market not March 2003 which was the end of wave 2. At least in US markets.
I have a hard time believing this is THE bottom. It has not been that long or deep. The debt crisis seems like one of the largest in decades and will not end this easily IMO.
But we will definitely have rallies and this may be one of them.
Roger,
Was that picture taken from you attending a KC and The Sunshine Band concert?
C'mon 'fess up, you are among friends!
:)
Linda, not my picture but I will say that I would go to a concert if they came to town.
I don't know their stuff that well save for one or two songs but I get enough of a kick out of some of these 1970's bands that have 100 people on stage (think also Cool and the Gang and Earth, Wind and Fire) that music almost wouldn't matter:->>
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