With the caveat that the market can remain irrational longer than you can remain solvent, here is my take on the markets
-first, retail is being set up for the fall. That little bounce over the past few weeks was designed to sucker in retail traders who will be panicking over the next few weeks, imo...
The economy was crashing, and the fed stepped in to "save" it. All they accomplished imo was to postpone the pain. How? By saying they would lend out all this money. How are they going to do that? Well, it sure is easy when they can just call over to the fed printing press and print off a few hundred billion more here and there.
Why do I believe this? Look at the weakness in the dollar... Hmmm... could that be... inflation? Why is everything getting so expensive? inflation?
We have a credit crisis. Oil is 112$, an all time high (inflation, anyone?). Housing prices are imploding. Lenders are afraid to lend because they are afraid people will not be able to pay them back. And they are afraid on a run on the banks. This is ingredient #1 for a recession. No lending = no growth = economic contraction.
And yet, retail traders have been brainwashed into thinking this last bounce over the past 2 weeks was the bottom. Ridiculous, imo.
So over the next year, retail longs are going to get doubly slammed, imo. Their shares will become worth less, and the dollar will become worthless, through inflation.
IMO we are in the early stages of a massive fall in the stock market. I still stand by my prediction made a week ago that sentiment is changing slowly, but surely to the negative, and we will start entering a phase of multiple 200-300 point daily declines, as retail starts to panic and shorts pile on.
-now the caveat is that there may be little rallies designed to trick shorts into going long, but I'm willing to endure a little pain before being eventually proven right. If this scenario plays out as I expect, FXP should be well into the 100's in a month or two.
ttac
I agree that we most likely will head lower over the intermediate to longer term, but I'm still neutral to cautiously bullish on the short term.
At the end of the day, the crooks that run the mutual funds on Wall St. still :
1) get paid based on their returns
2) need to put money to work in order to get those returns
3) Most are limited to buying things and can't really sell short
4) aren't managing their own money
5) and thus are more greedy than fearful
All that money made over the last few years has to be put to work somewhere:
- Oil's about the best safe haven I can think of (US Treasuries are garbage).
- Gold/Silver/etc can have some pretty erratic and choppy movements here while it sets up its next move higher.
- Interest rates can't really go all that much lower (and thus Bonds aren't really all that attractive).
- Select emerging markets (like Brazil - EWZ, Latin America - ILF, possibly Mexico - EWW) appear to be in good shape, but they are all more of a play on the XLE (esp Oil & Nat gas related names, Solars), XLI, XLB (esp Ag - POT/MOS/MON/CF/DBA, Steel & Iron - SLX/X/MTL/SCHN/NUE/AKS/CLF, Coal - KOL/ACI/BTU/FDG/WLT/JRCC/PCX/MEE ... Copper may be next - PCU/FCX) theme
And as you hinted at above quite a few times, most of whats working is a play on inflation in some form or another.
On a related note: I ended up starting a blog not too long ago. If you don't like technicals, you probably won't understand what the hell I'm talking about or what the lines on my charts mean, but you're welcome to stop by. I do post interesting links on occasion
🙂
http://tradermd.wordpress.com
I bought and held, now it's past 204.
