Why Haven't We Turned

These are the reasons I believe the market has not turned today despite the sell off in the banks:
  • Bull moves generally end on good news , not bad.
  • Strong trends rarely change course during option expiration week.
  • There is a merger closing today with a $44 billion cash component. Some of that money will be and is being redeployed.
However, this is setting up an excellent short opportunity for next week
  • The market will be maximum overbought at the end of this week.
  • Post expiration is a common turning point
  • Sentiment is extreme.


Applesaucer said...

Quick question: do you think the market topped in Oct/November 2007 on good news?

When I remember that year, I recall a horrible liquidity crunch during the Summer; the problems with some of the subprime lenders earlier that hear; residential real estate topping out in Summer 2006.

In other words, it seems like the bull market ended over a year after the good news ended.

I'm not arguing with you -- I think what you say is right -- but just sayin...


Tsachy Mishal said...

People did not recognize the news as bad at the time. They thought it was contained.

Tsachy Mishal said...

I vaguely remember the day of the high. In the morning everyone was giddy. There was extreme call buying and the market just turned. But thats just my memory. I might be wrong.

Anonymous said...

2007 november: we were not in a recession, economy was still booming, companies were banking loads of coin, and hubris delayed the wreckage for about a couple quarters after it should have happened. Also no one really had a crystal ball to look into the future but people keep using their hindsight 50/50 rear view mirrors to affirm what happened as if they thought they knew it all along.

Fred said...

2009 october: we are on our way out of the recession, green shoots sprouting everywhere, economy starting to take off, some companies (GS) banking loads of coin, and bailouts and implicit promises of more bailouts averting the wreckage that should have happened. No one ever has a crystal ball to look into the future but people keep using their hindsight 50/50 rear view mirrors to affirm that the stock market will boom the same way it did after it last bottomed in late 2002.

My take on what is happening is nicely summed up in the following quote from http://latimesblogs.latimes.com/money_co/2009/10/dow-10000-wall-street-stocks-correction-pullback.html: When do portfolio managers start taking some money off the table, anticipating a rougher ride for the market in 2010? They can't all just wait until New Year's Eve. Yet for now, many fund managers' retort to advice to lighten up on stocks is this: "You go first."

Anonymous said...

You realize the dollar is worth nothing now. Stocks should go up in value just to compensate for that. I'm short by the way. By the way mkt triple dipped in 02/03 but we double dipped this time. Difference is that on this move we're on now, we clearly broke out and there is no resistance overhead. That's scary isn't it.

It's a total complete gamble to call tops in this market. And that's what sucks and can potentially wipe you out as a shortseller in this market dawg. Has already been happening for 3 months now.