Tecnical analysis vs fundamentals vs pundits

[epidural man]

Where is the DOW headed?

Personally, I think we are in for a big, perhaps huge, pull back. When pundits say the economy is improving, I have no idea where this is coming from. Everyone keeps pointing to the strong jobs report recently to say everything is okay. What no one seems to say - or care - about that is that included about 40k of jobs from Verizon stopping a big strike, and that the number is barely outside the noise of that curve that bounces around anyway - and may be well within the noise.

First off, this is the six quarter where cooperate earnings have decreased. In the last 50 years, every time this has happened, there has been an S&P drop of >20%. That's pretty interesting.

I'll add second, third, forth, fifth, six - and so on reasons why I don't think stocks SHOULD rise when I have more time.

Ultimately, stocks don't tend to follow a reasonable pattern. However, I don't know why someone would still buy stocks today given the S&P P/E earnings ratio is so high right now (17-24 depending on if you look at GAAP or non-GAAP earnings). It boggles my mind that someone is spending money on stocks saying "yeah, this looks like a GREAT deal!" - yet prices are still rising, meaning more people are buying then selling still.

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[vector2]

There is no alternative to stocks considering the Fed is apparently never gonna move on rates. Just look at the soft GDP number this morning.

 

[Mman]

Ultimately, stocks don't tend to follow a reasonable pattern. However, I don't know why someone would still buy stocks today given the S&P P/E earnings ratio is so high right now (17-24 depending on if you look at GAAP or non-GAAP earnings). It boggles my mind that someone is spending money on stocks saying "yeah, this looks like a GREAT deal!" - yet prices are still rising, meaning more people are buying then selling still.

You should never invest in stocks with money you will need in the next 5 (or maybe even 7-10) years.

But you ask where the Dow is going? In the long term (10-30 years) it is going up. In the short term, I don't know and I don't care. Why invest in stocks? Because in 30 or 40 years when I need the money it will have been a very wise decision.

Also you incorrectly state that if the prices rise it means more people are buying than selling. That's incorrect. There is always a perfect equilibrium between buyers and sellers. You can't sell a stock to nobody. Somebody is ALWAYS buying, just like somebody is ALWAYS selling, even if the market goes crazy up or down. It's just the relative prices that people are willing to buy or sell at change.

 

[pgg]

You left "nobody knows anything" off your poll.

 

[epidural man]

You left "nobody knows anything" off your poll.

I kind of agree with this - but also agree...lots of people seem to know a lot and take huge advantage of it - time and time again.

 

[epidural man]

There is no alternative to stocks considering the Fed is apparently never gonna move on rates. Just look at the soft GDP number this morning.

Not true.

If you believe a pull back is inevitable - short it. Or buy things that typical rise when equities fall.

The Fed model (low rates equal high stocks) can only exist for a while...it will eventually crumble...so even though they won't raise rates, equities cannot be stretched to infinity. Valuations have ALWAYS regressed back to fundamentals.

http://www.bloomberg.com/news/artic...l-worried-about-bubbles-warns-of-u-s-downturn

http://www.marketwatch.com/story/th...-to-be-bullish-on-stocks-right-now-2016-07-22

http://www.alhambrapartners.com/2016/07/20/bring-back-the-fed-model-for-stocks-nope/

 

[Mman]

The Fed model (low rates equal high stocks) can only exist for a while...it will eventually crumble...so even though they won't raise rates, equities cannot be stretched to infinity. Valuations have ALWAYS regressed back to fundamentals.

The valuation can regress back to normal by the earnings rising over time to meet the higher price point. You don't need the price to fall. Microsoft stock from 2001 to 2011 is a great example. In 2001/2002 it traded for about 60 times TTM earnings. In 2011 it was down to 9 times TTM earnings. The stock price was flat nearly the entire time (though it did also pay a dividend for most of that time) but the earnings skyrocketed over that time to meet the stock price at a lower valuation.

 

[epidural man]

Unless it’s got something to do with gold, get rid of it. That’s the gist of what Jeff Gundlach, who’s in charge of more than $100 billion at DoubleLine, recently told Reuters in an interview.

“The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel – sell everything. Nothing here looks good,” he said. “The stock markets should be down massively, but investors seem to have been hypnotized that nothing can go wrong.”

 

[urge]

There is no alternative to stocks considering the Fed is apparently never gonna move on rates. Just look at the soft GDP number this morning.

This.

Fundamentals are bad, but there is a lot of money coming out of bonds into the stock market. Dow 30k is not impossible.

 

[G-Man82]

It's all noise. Tune out the noise! Invest for the long-run. Increase your savings rate and save more. No other options if you don't trust stocks / index funds


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[somedumbDO]

dont follow the dow at all. atleast for the S&P I see an upside to 2200-2225 then it depends on technical indicators at this time. US markets are strong. Where else you gonna put your money now? I dont believe in fundamentals there is too much money sitting on the sideline right now for that.

 

[DocFocker]

Look at what happened to Japan over the last two decades, stagnation and low growth. That is what is in store for us. They have tried to stimulate there way out of it for years and have failed miserably. The central banks think they can grow our way out of a global debt crises while the US thinks the answer is more government debt and consumer consumption. The party is over. It is just a matter of time before we have to pay the piper. Nobody knows when that might be though; could be this year, next year or 10 years from now. That is why trying to time the market is a fools errand.