Wednesday, March 17, 2010

Complacency? Never.

A quick look around the web reveals that type of impenetrable bullishness where it is clear skies and happy days as far as the eye can see. Gosh, I only wish it was so easy.

From this morning's MarketWatch we have this headline:

And yesterday's edition had my favorite "R" word:

It is all good until it isn't. On January 17, 2010 I wrote the following:

"There are two kinds of bulls: 1) there are those bulls who are intent on squeezing every last percentage point from this rally and who believe they can find the exits when the music finally stops; and 2) then there are those bulls who continue to have high expectations that the current market environment will yield strong returns. The latter type of bulls are unlikely to realize strong gains without a significant pullback, and by significant I mean that the pullback should get investors to think that the market is rolling over to such a degree that the current cyclical highs will never be revisited. The former type of bulls are likely overestimating their ability to get to the exits or identify the top before the next trader. Either way, complacency reigns as they don't ring a bell at the top."

I am still don't see why this time will be different. This is not a warning, but an observation.


Dacian said...


I think many of these "sentiment" measures don't work like before exactly because these sort of dynamics in the market

"Indeed, the biggest problem facing the manipulators is the lack of participation by the professional and middle classes which have steadfastly kept their cash in money-market funds ($3 trillion) and put money in “safe” bond funds (about $350 billion went into such funds in 2009) while they withdrew money from the stock mutual funds.

The Grand Game has always been to engineer a rising stock market, sell to the middle class suckers and then go short, making a fortune as the bubble pops and the middle class loses the “sure bet.”

Now that the middle class isn’t responding to the endless propaganda about how great the stock market is doing, then the Powers That Be are forced to trade between themselves–hence the low daily volume and high-frequency trading."

Here is the link (ignore the propagand part if you can, it's not the intent of my comment). But on the HFT, no participation, etc. I think the author is correct.

Anonymous said...

looks like you rung the bell too soon

D-man said...

Oh and that

"Dacian said..."

is D-man actually (my name isn't that common :))

Anonymous said...

"this time will be different", no, really it will.

Anonymous said...

The warning bells are ringing, and the fact that people are still bidding up the market is thanks to the bullish press (as you so grpahically show, Guy). I have a simple system based on MACD and a few other auxiliary indicators, and for the major ETFs they are screaming DANGER, PULLBACK AHEAD!

Guy M. Lerner said...

I guess it is pick your poison...we all have choices to make

D-man: Thanks for the link and I knew it was you

Denali92 said...

It has been an extraordinary move - beyond extraordinary in many ways, as the market has never provided a clean sensible entry point in the way of a reasonable correction.

Alas, so many bloggers and analysts are calling for a pullback that we may need to go even more vertical before this ends. There have not been two consecutive days with a lower low since Feb 5th, which is more than surpring.

Of course, it will end and then there will be pent up selling pressure, as lots of people with trailing stops will liquidate. We will then end of filling most of the gaps that we left below.

The big ? what will be the catalyst for a move lower?

As always, ever interesting.

D-man said...

"Alas, so many bloggers and analysts are calling for a pullback that we may need to go even more vertical before this ends. There have not been two consecutive days with a lower low since Feb 5th, which is more than surprising."

Yeah, what a wonderful journey we had in the LALA land...

D-man said...

And for that vertical, look at BIDU's chart; for those who bought at 620$, I wish them good luck!

D-man said...

Last one and I stop, promise :)

This move reminds me of exactly the same behaviour of the oil in 2008; despite the biggest recession in front of us in the last decades, the "pros" were suggesting to shut my mouth as I'm a poor retailer who doesn't understand peak oil. That move was vertical. Now I was bearish at 100$ on the way up, way too early. Same here, vertical move in spite of the fact that we're in the middle of a big valuations contraction cycle and the yields on S&P are very low to have a secular move; of course, I know nothing because I'm not a pro, which is true.

More it moves up, harder the fall.

Guy M. Lerner said...

D man:

Gets back to my point: can you get out in time?

Everyone thinks they can? But last time I suggested this the SP500 lost about 7% in 2 weeks

I have put myself out there and given my rationale --that's the best I can do

D-man said...

No problem Guy, I respect that that's why I'm checking DAILY! your blog. I don't like adrenaline, it's not my personality; I'm an investor and I invest my hard earned income which is just an average salary (I'm a family father as well). Now those savings I have I want them protected, otherwise I go to Vegas and play there.

Vertical moves? Not interested in; lost 100 points on S&P up or down? Don't care. I try to go where risk is low (at least as far as I can understand it).

Guy M. Lerner said...

It's all good brother!!

asperges said...


asperges said...

Hi Guy,

I do appreciate your blog very much.

Today, I was thinking about the Goldman Sachs forecast for 2010: they predict an S&P around 1300.

While interest rate is low, estimated P/E around 15, low inflation, it's all good for risky assets and stocks.

I also sold today my 25x leveraged index of the AEX because it is a daytrade.

But VIX this low, put/call equities very low for 1 week!!, I would expect a top is not far away.

Can it be on of those momentums that all media and investors become bullish as well? I'm beginning to think that's the case at this moment. Although I know that most traders are bearish, what if they turn bullish too?

Thank you in advance for your comment

Anonymous said...

So many see the fall coming in the markets. The bears have had numerous opportunities to take this market down and have not stepped forward - not once. Here we are with the bonds (Guy's TLT) getting close to a top and where are the bears? I look at TLT and see the bonds coupl-ing/re-coupling as is normal (Ylds up/Stocks up). Gold looks to have set the stage to recouple as well. You may find that the Ylds rise as the markets rise, but until then go with the flow and forget bottom picking too soon which is as bad as being late to get out at the top.

D-man said...

"So many see the fall coming in the markets. The bears have had numerous opportunities to take this market down and have not stepped forward - not once."

Totally agree with that; sellers are non existent; they are scared like death.

Anonymous said...

Bulls are ruined, especially those who buy now should lose all their money in early June or earlier.
Crash is began in few days bulls and are is the KING AND MOTHER,BIG BEAR.