The theme I have been discussing lately are the 3 C’s: Clarity, Conviction & Consensus:
1) Clarity: Right now, there is none. By our metrics, we are not at a major bottom. Nor can we say that the data supports the argument that we are at or near a top. Indeed, we are now more than 15% away from recent highs.
Nor are we in any sort of trend. There is no clear momentum in any direction.
And the prior trading range of SPX 1041 to 1170 is now decisively broken. So the most we can say is that we might be in a new trading range, from 975- 104o.
2) Conviction: The street fight between bulls and bears is notable for the lack of real conviction amongst the players. The bears have had the upper hand for 2 months, yet we don’t see the shorts pressing their bets.
The bulls argue that earnings are good, companies have clean balance sheets, and growth is supposed to slow after the initial post recession surge. Yet they don’t seem to back up their arguments with cold hard cash. Some Value guys argue stocks are cheap, but they recall getting burned in 2008 the last time we saw that. They seem to be sitting pat.
Yes, its the Summer, and trading should slow down — but the abysmal volume tells us there is little institutional interest in making any commitments to equities and even less enthusiasm from Main Street.
3) Consensus: I cannot recall the last time a) so many people were projecting a recession; b) the crowd got it right.
There seems to be a consensus that a double dip is likely. Most everyone is arguing that ECRI’s weekly leading index supports a double dip. Everyone, that is, except for ECRI themselves.
The recessionistas — Hussman and others — argue from a sample set of 7 recessions, and while I do not disagree with using historical data, we are constrained by having a mere century’s worth. Its better than nothing, but only marginally so.
The worst thing about being mortal is that we won’t be around 1,000 years from now. By then, we will have a sufficient data set to draw better supported conclusions as to what, if anything, historical data projects about markets and the economy.
Until then, exercise, watch your cholesterol, and wait for more clarity.
I prefer to watch small caps in downturns. Russell 2000 is in a downtrend, lower channel support is near 583-585. Any intraday touch of that number, and I will put on a trade for a bounce. I have no clear idea where the floor is in this funhouse, but I think it will have a big QME v.II logo printed on it when it’s found ;)
There is no “clarity,” because no one wants to believe how terrible the numbers are, or we are all contrarians waiting to pounch on the next bounce.
“There is no clear momentum in any direction”
Seriously? You have taken a calm analytical approach this morning but Mr Market seems to be in a bunch over the head and shoulders formation.
Plus the failure of the mythical PPT to arrive yesterday for their 3:30 checkup.
The gold bugs and euro-shorts have also woken up grumpy.
It is not a good time to be long anything but inverse ETFs and BP.
>> The worst thing about being mortal is that we won't be around 1,000 years from now.
Stick around for the next 40 years, Barry, and you might change your mind about that.
Er, that line was confusing. In a roundabout way, I was trying to imply that “immortality” medical technology might be available as soon as 40 years from now.
I’ll throw in my tuppence worth:
Clarity: I think it’s fair to say that various leading(ish) indicators are suggesting a slow-down (some a double dip, some just a slow down) but there’s been little confirmation from the good (imho) real-time indicators (ADS, CFNAI).
Conviction: I’ve no real equity exposure, but it would take a move in the markets (because my shorts are through puts) or some confirmation from those real-time indicators for me to express my bearish opinions more significantly.
Consensus: Generally, from the people I speak with, they are more concerned with the things they can’t see than they believe in the things they can. That said, also from speaking to them, I don’t think their portfolios reflect this (especially in hedge fund world) – there seems to be more hope positions (both in terms of gross/net exposure and the type of names) than I’d expect.
“The worst thing about being mortal is that we won't be around 1,000 years from now. By then, we will have a sufficient data set to draw better supported conclusions as to what, if anything, historical data projects about markets and the economy.”
Cheer up – Ray Kurzweil is going to upload your consciousness into some computational dealie-blobber, so you’ll be able to invent a hundred thousand years of data and play with the sets all day long.
Read Corey Doctorow’s short story “I, Rowboat.” It’s pretty funny and interesting. Not quite “insanely funny intellectual comedy,” but good enough to get the job done.
“There seems to be a consensus that a double dip is likely.”
Double dip? Recession? What a laugh ask all the unemployed (several millions) if we ever left the recession to begin with. Ask the SMB if we ever left the recession to begin with. All we had was a bounce on the stock market fueled by the injection of cash via government intervention. This may have produced the illusion of “recovery” but deflation is still here and re-asserting itself. Moreover, I see the republicans cutting all social-economic supports (UE benefits) just to make sure democrats get crush in the midterms. This will remove even more cash from the consumers. I also see banks accelerating their foreclosure “inventory”. This means lower housing values and therefore lower consumer confidence. Welcome to the “malaise” presidency
“Until then, exercise, watch your cholesterol, and wait for more clarity..”
for those interested in, a little more, ‘clarity’ –on cholesterol– see http://www.westonaprice.org/
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Weston+A.+Price
some of our greatest ‘convictions’, held by such a ‘consensus’, are, merely, wrong-headed..
but, they (said, ‘convictions’) manage to sell, whether they be Statins, or Counterfeit Money-substitutes, as, but, two examples, a tremendous amount of Worthless G*rbage..
exercise (for the circulatory benefits), though, + a puss full of sunlight (for Vitamin D), are, still, good things..
http://www.thefreedictionary.com/puss try def. 2, #2
BR offered:
And the prior trading range of SPX 1041 to 1170 is now decisively broken. So the most we can say is that we might be in a new trading range, from 975- 104o.
reply: —————— 975-1040: OK I’ll buy that for this week. ???-975 for next. This market’s going down faster than a crack wh@re.
http://www.youtube.com/watch?v=l5dvJSlWbLc&feature=related
Young married couple in debt ever felt had?
I bought TNA for the bounce at 33.20.
“I cannot recall the last time a) so many people were projecting a recession”
Barry we’re in a depression, not a recession, and we never left said depression, we just spent a bunch of money we don’t have to pretend it didn’t exist!!!! Most of the clowns jumping on the “recession” bandwagon are the same clowns who said we are in a recovery three months ago. They’re full of garbage and just don’t want to look stupid; aka Nobel Laureate Paul Krugman.
I’m not sure the numbers necessarily matter at this point on whether there MIGHT be a double dip. The economy is us. If enough people are convinced that a double dip is imminent, then a recession we will have.
While the banksters and hedge funds have an awful lot of money and can certainly influence macro to some degree, their assets still pale in comparison to the rest of us. If we the people (which is increasingly a global statement) pull back and save our pennies against a double dip, then we will have a self-fulfilling prophecy.
There is also the fact that the bots comprise the bulk of the volume these days (and have for quite some time), so they can call a bottom whenever it suits their fancy to do so. I suspect they will allow this market to get modestly oversold (we’re not there yet), and then unleash a pretty good rally, with no reason behind it other than they can, and will make money by doing so.
But the bots can’t go for very long without feeding, so stay cautious as we wend our way lower. I doubt very much that we will test the 2009 lows in this move.
@Transor Z 10:55 am — thanks for the clue, but you didn’t provide a link (Cory releases all his stuff under the Creative Commons License, so it’s freely available — and he still manages to make a living from writing!)
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