Do We Need A Breakout

We are less than five points away from the January high on the S&P 500, which was 1150. If we were to breakout from that level it would likely suck in the last holdouts. With the market and sentiment stretched that would likely lead to a climax rather than another leg higher. Have a good night.


PJ said...

I don't think we need an S&P breakout to get a climax, we're in one.

Russell 2000 and Nasdaq have already broken to new highs. Insolvent companies like Citigroup and AIG ($100 bn in debt) are leading this rally. Most of the S&P 500 have sound balance sheets. I think the lagging rise of the S&P is not a sign of lack of enthusiasm, but of a rotation into riskier securities. Thus it is a sign of extreme bullish sentiment, and a bearish indicator.

Of course new highs are not far away, and it wouldn't be a surprise if they are penetrated this week.

PJ said...

By the way, got a laugh from this indicator (via Mahalanobis):

What is really the best indicator that the financial and economic woes of the last few years are behind us? Healthy stock markets? Falling bond yields? The return of big-ticket M&A? Rising employment and GDP? All of the above? No! Look no further than superyacht sales. The rich are back on a buying spree and have snapped up 28 superyachts worth €300m in the first two months of this year, against just seven for €60m a year ago.

Anonymous said...

Tsachy, do you have a target on the way down? Are we going to bounce quickly or continue lower? thanks.

Tsachy Mishal said...

I don't use price targets. I constantly monitor the conditions and decide.

That said, I am not looking for a very large pullback if we correct now. If the corrction is put off and happens later it will likely be larger.