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I'm becoming more baffled by the markets with each passing day now. Most of the "better than expected" results have been based on job cuts etc so I don't understand the euphoric reaction. The "improved" GDP figures are largely based on government spending while consumer spending continues to contract. We still face the commercial real estate implosion, Alt-As, Option ARM etc I could maybe understand people piling in when the media was ramping the green shoots, but they have now faded to a large extent. I reckon the market could look down and have a Wile E Coyote moment imminently.

What is this rally really based on? I don't get it. :blink:

Edited by MOP

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a strong swing in sentiment from Bearish to Bullish

What is this bit based on?

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Low interest rates, loads of liquidity, and a strong swing in sentiment from Bearish to Bullish

re: sentiment, I'm in the US this week, only 30 miles from detriot, and it feels quite upbeat here, very different to the doom & gloom back home. Here they do think they have hit bottom.

one caveat ... the few people here I have asked do all think it won't last, and any recovery will be a long hard slog, but they seem to be up for the challenge. Can't see us wingeing brits being up for any sort of challenge.

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I am completely amazed by stock markets' recent upward surge with the FTSE 100, for example, getting up to 4700 points. I can only put it down to an attack of madness coupled with QE cash.

This sort of wild volatility was very much a characteristic of the 1929-33 crash.

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The market swung to a Bearish extreme in Q1, and by early March people had raised loads of cash expecting even worse news.

After an extreme, sentiment tends to swing in the opposite direction, and that is what we have been seeing.

I reckon we are at/near a Bullish extreme, people's hopes are running far ahead of reality, and we should soon see a swing in sentiment back towards Bearish, as unrealistic hopes are exposed as fantasies.

It is hard to get the timing of these swings precisely right ('though I try to), but I reckon a turn is very near

Without wanting to sound condescending, understanding sentiment, and how it moves stock prices, is a key

step to becoming a successful trader. The current state of the market should back up this notion

Do you think it will be getting the kiss of death next week?

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My current guess is a swing back will start this week, maybe in the next 24 hours,

but it may not. I'm not at all sure what the news trigger will be, if one is needed.

The point is, that "stretched" marktes like this one, are vulnerable to all sort of news.

Almost any pin can burts the hope-bubble.

I reckon the S&P500 will go to the 1150 range before it turns, earliest mid-September (current guess).

It should be noted that a 25 year trend line was broken in March. Some would note this as Support, but to me it looks like confirmation of the Bear market, which started in 2007. What we have now is simply the first retrace of the 2007 Bear market and there is still some life left in it, hence my ±1150 / September leaning.

We'll see.

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I'm becoming more baffled by the markets with each passing day now. Most of the "better than expected" results have been based on job cuts etc so I don't understand the euphoric reaction. The "improved" GDP figures are largely based on government spending while consumer spending continues to contract. We still face the commercial real estate implosion, Alt-As, Option ARM etc I could maybe understand people piling in when the media was ramping the green shoots, but they have now faded to a large extent.

What is this rally really based on? I don't get it. :blink:

Have a look at this, just stumbled onto it:

Putting it all Together: Managing Money as you Peer into the Abyss

Extract:

...

As such, we are intrigued, yet unsurprised, by the stock market’s behavior. Having extensively studied the economics of deleveraging and the depression era itself, we are reminded of its 6 rallies measuring between 21% and 48% (in a total bear market that measured 89%), each caused by an increasingly larger dosage of government stimulus. Still, we spend a lot of time thinking about what could change our outlook and looking for holes in our reasoning, especially in light of our stark counter-stance to the consensus. We have also spent a lot of time studying how bear market rallies in the past have manifested themselves, and they tend to resemble the current experience, a strong move thrust off short-term orientated wishful thinking such as 'Green Shoots'.

So, what is fueling it?

  • Many investors, if represented by the financial media, have failed to adjust from the vanquished paradigm of low inflation, stable credit creation, and robust economic growth. We consider but choose to ignore the noise.

  • A lack of suitable alternatives: With interest rates remaining low, the value of stocks on a relative basis is appealing. Indeed, whether measured against Treasury-bond yields or corporate-bond yields, the stock market appears not only fairly valued but perhaps even relatively cheap.

  • Chasing performance: There is a record amount of cash sitting on the sidelines. The rally is now feeding on itself as investor pressure not to lose has been replaced by pressure not to miss out. That fear leads to speculation, not investing. In other words, fear is manifesting itself as greed. (We suggest reading Seth Klarman's elaboration of this matter.)

  • The marked improvement in economic growth, or what has been described as the emergence of ‘Green Shoots’: US growth has gone from falling at a -6% rate to improving at a sluggish but improved -1% and investors seem to be discounting continued acceleration into the future. To assess the validity of this generalization, it is important to identify the source of the turnaround.

...

It's worth reading the whole piece, I'm still digesting it but it seems to be quite good so far.

http://www.zerohedge.com/article/putting-i...-you-peer-abyss

Edited by williamdb

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I too am not seeing the new business, to believe this stock euphoria.

Where is this optimism coming from?

I'm lucky I sold my B&B shares when I did, and bought a nice guitar.

I still have a nice guitar. ;)

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So, what is fueling it?

Cheap money and [false] inflation expectation a la QE is my guess. Cheap money is pushing everything up. The financial markets are levitating from the real economy.

http://www.moneyweek.com/news-and-charts/e...very-71239.aspx

Already we’re seeing a “recovery” bubble building. I said yesterday that the current markets felt uncomfortably like early 2007, when everything was rising and no one could find any reason for it to stop. In today’s Financial Times, John Authers compares it to a different time period – last summer. “The rally in risky assets is painfully reminiscent of the behaviour that preceded last year’s crash. Then, as now, commodities, emerging market equities and high-yielding currencies validated and supported each other higher.”

Meanwhile, the dollar has been taking a kicking as investors abandon “safe haven” assets. In fact, the greenback has “now given up half of its gains since it hit bottom last July, just as the bubble of commodities and emerging markets was about to burst. Then, as now, the advance of relatively risky assets has been uniform, and undiscriminating.”

Whatever the reason behind rising commodity prices – cheap money, “stimulus” packages, or demand from China and India – they are bad news for a fragile global economy. Higher raw materials prices hit profits and raise costs for consumers just as they need the money most. But they also put pressure on central banks to raise interest rates to combat inflation. With cheap money the main thing keeping the global economy afloat right now, any hint of tightening could bring the rally to a very rapid end indeed.

Edited by roman holiday

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inverse relationship between $ and stocks / commodities (at present)

if the $index slides further away from it's previous 78 support, this bear market rally may have some legs yet

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Guest Parry aka GOD
What is this bit based on?

QE

Wait until they aim the QE gun at commodities.

At the same time as the USD goes pop.

Lot's and lot's of hungry people.

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Funniest thread I have ever seen :lol: . Sorry, but you should hear yourselves. I doubt anyone has ditched the 'system' and all its cohorts, and gone off to do it 'Your' way. If you did this, you would see the great divide, and all what is 'the system' glearing out as if it has 1000 ft neon lettering saying 'this is all ******** this side'. Try it, you will see exactly how the markets will be moving and see exactly why ups and downs occur.

ps; for petes sakes, get out of the sheep pen and do your own research and ignore the crap spouted by moneyweek, buffet, IC etc... as for tipsters - :lol:

Do you ever see any of them highlighting superb stock? No you don't, you get fed nowt but rubbish and eat it. Go in search of real healthy food instead.

Get out of the constraints of the 'system', it does not want people to make money.

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My thinking is as follows

Stock market bombs the ingenious highlight in the optimum cosmology. Under outperformance exercises the knowledge. The motivated surplus brushes against stock market under a false decline. Outperformance attaches to stock market. The design elaborates the disco. Qe forks your signed ham. The continental farces the metric below the game stair. Qe refrains across house prices. The tower planes mortgage approvals. Should Allsopp bar mortgage approvals? An accent parses the least confidence. The recursive executive prosecutes outside mortgage approvals. The devil mends after a suicidal applause. Allsopp dumps mortgage approvals over the prototype.

I think this makes as much sense as the people trying to explain movements in what is effectively an unpredictable market.

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Guest Parry aka GOD
My thinking is as follows

Stock market bombs the ingenious highlight in the optimum cosmology. Under outperformance exercises the knowledge. The motivated surplus brushes against stock market under a false decline. Outperformance attaches to stock market. The design elaborates the disco. Qe forks your signed ham. The continental farces the metric below the game stair. Qe refrains across house prices. The tower planes mortgage approvals. Should Allsopp bar mortgage approvals? An accent parses the least confidence. The recursive executive prosecutes outside mortgage approvals. The devil mends after a suicidal applause. Allsopp dumps mortgage approvals over the prototype.

I think this makes as much sense as the people trying to explain movements in what is effectively an unpredictable market.

Scary. It made perfect sense to me.

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My thinking is as follows

Stock market bombs the ingenious highlight in the optimum cosmology. Under outperformance exercises the knowledge. The motivated surplus brushes against stock market under a false decline. Outperformance attaches to stock market. The design elaborates the disco. Qe forks your signed ham. The continental farces the metric below the game stair. Qe refrains across house prices. The tower planes mortgage approvals. Should Allsopp bar mortgage approvals? An accent parses the least confidence. The recursive executive prosecutes outside mortgage approvals. The devil mends after a suicidal applause. Allsopp dumps mortgage approvals over the prototype.

I think this makes as much sense as the people trying to explain movements in what is effectively an unpredictable market.

You are a William S. Burroughs cut-up and I claim my £5 of heroin...

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My thinking is as follows

Stock market bombs the ingenious highlight in the optimum cosmology. Under outperformance exercises the knowledge. The motivated surplus brushes against stock market under a false decline. Outperformance attaches to stock market. The design elaborates the disco. Qe forks your signed ham. The continental farces the metric below the game stair. Qe refrains across house prices. The tower planes mortgage approvals. Should Allsopp bar mortgage approvals? An accent parses the least confidence. The recursive executive prosecutes outside mortgage approvals. The devil mends after a suicidal applause. Allsopp dumps mortgage approvals over the prototype.

I think this makes as much sense as the people trying to explain movements in what is effectively an unpredictable market.

Market behaviour is predictable..... but then the timing is even more difficult.

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Market behaviour is predictable..... but then the timing is even more difficult.

Which bit is predictable - the fact that people on here claim to be able to predict it and fail spectacularly? Or something else?

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I think this makes as much sense as the people trying to explain movements in what is effectively an unpredictable market.

You miss the point. You don't need to predict it. You only need to know what it is doing now and be prepared for that to change as time passes, knowing what is next in the sequence. The market works through its sequences with grinding monotony as people make the same mistakes time and again on every timeframe. Right now it's going up. This will continue until the sequence is complete. Then it will go down. I could tell you now what has to happen before the current sequence can complete, but your mind is closed and you'd get angry probably as it goes against everything you think you know about the market.

Keep up your post count Noel, they're all keepers!

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You only need to know what it is doing now and be prepared for that to change as time passes,

This is spot on. I found a while ago that the best way to make money from stocks was to stop having an opinion and just follow everyone else.

Stock sheeples rule!

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You miss the point. You don't need to predict it. You only need to know what it is doing now and be prepared for that to change as time passes, knowing what is next in the sequence. The market works through its sequences with grinding monotony as people make the same mistakes time and again on every timeframe. Right now it's going up. This will continue until the sequence is complete. Then it will go down. I could tell you now what has to happen before the current sequence can complete, but your mind is closed and you'd get angry probably as it goes against everything you think you know about the market.

Keep up your post count Noel, they're all keepers!

"but your mind is closed and you'd get angry probably as it goes against everything you think you know about the market."

You are right in that I know little of what the market is going to do next - by this I mean I can't make money by timing. I concede that the vast majority on here are able to and I am envious of their seven figure incomes. Please don't talk crap about closed minds - it is tedious.

"Keep up your post count Noel, they're all keepers"

You are so kind.

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Guest Parry aka GOD

I have no idea why any of you get so uptight about any of this.

1. Who the hell knows what anyway, black swans and all that?

2. You're all gonna die one day anyway, so what does any of it matter?

3. Until '2' (see above), it's all water under the bridge and life goes on.

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I'm becoming more baffled by the markets with each passing day now. Most of the "better than expected" results have been based on job cuts etc so I don't understand the euphoric reaction. The "improved" GDP figures are largely based on government spending while consumer spending continues to contract. We still face the commercial real estate implosion, Alt-As, Option ARM etc I could maybe understand people piling in when the media was ramping the green shoots, but they have now faded to a large extent.

What is this rally really based on? I don't get it. :blink:

To answer the OP's orginal question as opposed to looking at charts and the alignment of the planets to see what is going on.

It does not matter to investors (note not traders) that the profits are a result of cost cutting. All they care about is that profits at a decent level are made for two reasons. First is layoffs, the potential for mass redundancies is much reduced, so meaning that they can see a bottom to increasing unemployment claims in the future. Second it means that companies can continue or increase their capital investment plans so increasing the overall economy (a virtuous cycle).

The nightmare for the stockmarket would have been continuing losses, more mass layoffs and reductions in capital expenditure budgets.

So the market is telling you over the medium to long term that the future and I stress future is better for the economy than it was months ago and has hence risen.

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I too am not seeing the new business, to believe this stock euphoria.

Where is this optimism coming from?

I'm lucky I sold my B&B shares when I did, and bought a nice guitar.

I still have a nice guitar. ;)

But if you had put that B&B sale into RBS shares you could sell now and have a nice car!!!

M

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Guest Steve Cook
The market swung to a Bearish extreme in Q1, and by early March people had raised loads of cash expecting even worse news.

After an extreme, sentiment tends to swing in the opposite direction, and that is what we have been seeing.

I reckon we are at/near a Bullish extreme, people's hopes are running far ahead of reality, and we should soon see a swing in sentiment back towards Bearish, as unrealistic hopes are exposed as fantasies.

It is hard to get the timing of these swings precisely right ('though I try to), but I reckon a turn is very near

Without wanting to sound condescending, understanding sentiment, and how it moves stock prices, is a key

step to becoming a successful trader. The current state of the market should back up this notion

agreed

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