Sep

15

Sell New Highs?, from Paolo Pezzutti

September 15, 2009 |

13 Comments so far

1. Andrew McCauley on September 15, 2009 8:04 pm

   Perhaps measuring the historical limits of this rally, in terms of gain versus time post all major market lows, may provide a practical reference point for rally exhaustion.

   For example, over the last 50 years the Australian Equity Market has produced seven major observable bottoms with March 2009 being the most recent addition to the list.

   Since the March 09 low the All Ordinaries Index has rallied just over 47% in 135 trading days. The return profile post these major lows indicates that the rally has reached its historical limits in term of percentage gain over a given time frame.

   The maximum gain over the 150, 200 & 250 day intervals are 48.60%, 44.89% & 51.2% respectively, it would appear that any upside is probably limited over the next three to six months.

   I think time needs to catch up to this rally.

2. david higgs on September 15, 2009 9:36 pm

   Kind of like Chinese water torture isn't it. I just hope my good stock don't get called away from me Friday, and if you don't know, Biggs just declared that the market going straight to 12k soon, and no telling what Wein will say tomorrow. on CNBC… I just know if I hear them say one more time of all the cash on the sidelines and all the managers that have missed this recession bull market, I'm gonna — well you just don't want to know…

3. david higgs on September 16, 2009 8:00 am

   Where else is there to put one's money — banks?

4. Faisal Danka on September 16, 2009 12:18 pm

   Just when the majority of bears will give up and become bulls. This is when it is going to happen. Recent dips, where correction opportunities were missed are going to further boost the confidence. The new good is “less bad than the previous”.

   Next quarter earnings showing lack of topline growth and exhaustion of bottomline growth (can’t cut through bones), could be the catalyst.

5. david higgs on September 16, 2009 1:42 pm

   be long or be wrong… seems the current maxim from "the" floor!

6. Star on September 16, 2009 11:20 pm

   Nine new highs in a row for you as of 9/16. Looks like a bull market.

7. Steve Leslie on September 17, 2009 7:14 am

   If the question is when will the next correction take place, the answer is usually when you least expect it. I know this is pointing out the gorilla in the room so let me go on for a bit.

   For the first time in a year, I am starting to see anecdotal evidence that confidence is beginning to creep in to the marketplace from the media. CNBC the elephant in financial communications is starting to become very bullish on Fast Money. Lasts night's program was particularly optimistic about a big upleg push from here. In addition, the programming is now One Year After the crash. Next will be Kudlow and Fox programming for Saturday morning. Watch for cover's of Barron's and Business Week. This is all, a part of the vetting process. We as Americans are consumed by anniversaries. so the timing is very appropriate. Others will begin to stream on board More and more professionals such as Equity advisors like Cohen, will begin to be more visibly bullish because that is what they do. So watch the programming from here. Bulls are now talking about financials and their own financial health. Commodity prices are beginning to firm up. Oil Nat Gas coal, and gold are working higher. Things are going to become rosy quickly. Shorts who have been big winners will get squeezed and pressure will abound for them to cash in their winnings. Hindsighters will talk about how the summer rally will extend into the end of the year. How will the last quarter shape up etc. Traders hedge funds and others are just back from Labor days and the dog days of summer. If things are true, they are flush with cash. The US will pull the rest of the world with it.

   This can now set up for the classic, October correction to shake things up. October can be one brutal time in the history of the markets. One last time for the bears to slash at the market and bring it down a notch. This will shake up the individual investor enough to keep them cautious so the pros can once again come into the long end and make money in Nov, Dec and Jan, good times to make money historically.

   Of course this is one view. Or it could be Miss Scarlet in the pantry with the crowbar that causes a correction. We shall see.

8. Mark Johnson on September 17, 2009 10:55 am

   Coming back from the dead.This rally allowed me to make a titanic (for me) comeback. After devastating losses of 82% OF EVERYTHING I OWN from May 08 to March of this year, I am now down 16%. I was "all in" and i took several bullets. Every lesson from the chair's books and from bacon was experienced and learned first hand unfortunately. I am a better man for the experience, however i am early to pull the trigger at the first sign of danger. I don't want to lose my chips again. Case in point. I had all my money in MGM Mirage from the 5's. Yesterday after a steller run and a strong start i say to myself "the rally continues" then i notice the weakness creeping in. Since my base is not strong as the chair has pointed out as a necessary tool mixed with the fact that every penny i own is in the stock made it impossible once i saw the flagging. Ya see i saw this before many times and ignored it and got sliced in 2. So i sell everything. i promised myself that i would not pull the sell trigger until 20, but once ya loose you're chips and youre base isnt strong ya dont want to go back again period. of course today i am kicking myself as MGM is up 9% at the time of this writing. After suffering so long will it race up to 20 along with the market to 12,000? i dunno. If i did i would be able to dine at the fine sushi restaurants like the chair, but alas a moving salesman and would be trader will retire to Iquitos with doc bo and dine on the fresh dorado for 5 dollars or so. I guess not so bad. I dont know how long the up days can or will continue, but like Steve pointed out so eloquently the big boys will hit unexpectedly just as mom and pop retail investors are comfortable again. For me, I will watch MGM and maybe i will miss some of the run. But i learned to never chase for fear of missing the big rally. I did that many times last year and paid dearly for it. For someone like me there is no trading from the middle. I dont trade on margin (thank G_d — i woulda lost everything) I can only make money going for doubles, triples and hr's. single stocks strait to win. A good education, but not one that i want to repeat.

9. Duncan Coker on September 17, 2009 3:49 pm

   Speaking of new highs, I wonder what diabolical plans they have in store for the open on triple expo tomorrow.

10. david higgs on September 18, 2009 12:39 am

    Duncan, you know that in the old days Triple Witching really meant some roller coaster rides, but over the past years they a wimper now and that all the activity takes place days prior now… well that's what I seem to recollect, but then I haven't gotten squat right for months now… u know something Coker?

11. Duncan Coker on September 18, 2009 7:16 am

    Interesting that last Sept exp we opened up some 65 points, the biggest open in the last 10 years. Now that's an open. Also marked the beginning of the descent into the maelstrom.

12. Kevin Ho on September 21, 2009 5:19 am

    Notwithstanding we’ve gone thru what the majority will define as the ‘worst financial crisis’ in history just barely 12 months ago, we now have serious disagreement even in a ‘post’ crisis investment community.

    A recent Bloomberg survey of 53 economists in August estimate US GDP growth to be at 2.6% in 2010, whereas 1500 financial analysts surveyed estimate an average of nearly 10 times this figure as earnings potential for next year for firms in the S&P500.

    Have investors already forgotten the lessons of hubris learnt last year, as in 2000-2001, as in 1997?

    In my little corner of the world, Singapore, property prices have rebounded so strongly that locals have been seen queing days ahead of new condominium property launches, as if the crisis never occured.

    I saw this happen in 1997 to devastating effect in Asia.

    Perhaps it is in the human condition to never remember the lessons of the past…and good on those who can take advantage of this tendency.

13. Steve Leslie on September 21, 2009 7:42 pm

    Not to disparage economists but there is a reason why they call it the dismal science. Peter Lynch once espoused that he spends 15 minutes a year studying the economy. I wonder if that were true.

    That said, back in March, I said that GS at 45 and MS at 6 were at once in a lifetime prices. The Dow is now up 46% from its March Low and at the time everyone was predicting a china syndrome. Only 6 times in 100 years has the Dow gone up 46 percent in such a short time. Now the glass appears a bit more clear and some are interested at 9800. Yes it is a bizarre world we live in. Retail investors are just such losers because they must run in herds.

    Where are the eagles. My experience is they are the quiet ones the ones who wish to fly below the radar. And they are the true hunters. History shows us that post calamitous events offer the best opportunity for financial gain. so So many examples in history. But as Napolean cautioned man who does not study history is destined to repeat it.

    One caution September and October can prove to be trecherous times. Nov Dec and Jan can be the best times.

    Do your self a favor sometime and read Ralph Wanger A Zebra in Lion Country. he started out his Acorn fund in 1974 or 1975 I believe. A great book to learn from. Also Gerald Loeb The battle for investment survival.

    My view is right now to put the shopping list for the end of the year. Tech seems to do good near the end of the year. Watch the political climate as health care debate and passage of the bills seem to be losing traction. Even Pres obama could not explain things to Stephanopoulus. His numbers and those for congress are sinking badly. Any post election bounce is really waxing and waning.

    Then again it might be Professor Plum with Miss Scarlett in the pantry with the gun.