The Good and The Bad

I still favor the long side but after the bounce we have seen off of Thursday's lows it is harder to make a table pounding case for the market. Here are some of the positives and negatives I am seeing:


  • The only time the market has been able to rally recently is off of extreme oversold conditions. That is no longer the case.

  • There are liquidations happening and there is the potential for more. I cannot prove this but in my opinion the 100 point S&P 500 drop we saw last week in a little more than two trading days did not happen on its own. The news was not that different from what we have been seeing.

  • The EU is not responding forcefully enough to the liquidity issues. Everybody in the EU is trying to deleverage at the same time. Somebody needs to take the other side of that trade.


  • Into quarter end rebalancing, positive seasonality and markups are supportive. We had deep sellofs in March, June and August. At the end of each month we saw a rebound.

  • Sentiment is pessimistic and equity exposures are low. Market participants have a lot of room to add exposure if they ever find a reason to.

  • We continue to see corporations repurchase shares and continue to see cash takeovers.


1 comment:

frank r said...

Sold off most of my stocks. I tend to agree with you that something is strange when stocks aren't rallying except when deeply oversold.