We have a big gap up in the works today and if the pattern this year continues, which I think is the way to bet, then the gap up today on Holiday retail sales optimism and the pent up demand after a bad holiday trading week will probably be sold. But that doesn't mean a gap up is not a good sign for the bulls. A gap up this large after several days of selling is a sign of seller exhaustion, and an imminent turn higher in the coming days. But that turn higher usually happens either the next day or a couple days later.
The fear in the investor community to lower oil prices and poor guidance from tech companies is still thick. And unlike previous fear related selloffs in the SPX over the past 10 years, there is a strong fundamental basis for that fear. Fear based on a Chinese devaluation and lower oil prices in 2015/2016 were exaggerated and not built on a strong base of fundamentals. But this time, not only are there Chinese devaluation and lower oil price threats, there is also the threat of a tech earnings peaking out with global growth as market valuations are higher now than they were back then. Earnings growth built on tax cuts and fiscal spending is much less sustainable than organic growth based on a growing economy with a rising worker population and productivity.
One positive that is different now than a few months ago is the change in tone from the Fed, which is now going from the raise until something breaks mode, into the raise only if the SPX is rising and economic data is beating expectations mode. After the December hike, there will be a much higher bar for the Fed to raise rates. In their minds, they are probably thinking rates are at neutral after the next hike, but will not be willing to be too transparent about their thoughts, because they want to leave a window open for further rate hikes if the stock market regains its strength.
But much like 2000, the Fed pausing after an extended rate hike cycle doesn't necessarily mean that the stock market reacts positively. When the stock market is as overvalued as it is now, the earnings path versus expectations overrides the longer term macro factors. And the reaction to the Q3 tech earnings in October and November clearly show that stocks are not priced right for what is likely to happen in 2019. Most of the leading indicators are pointing to lower growth in 2019, and the tech leaders have gotten so large that it is now hard for them to achieve above average earnings growth rates.
Clearly the law of large numbers has caught up to AAPL, and is quickly catching up with AMZN, GOOG, and FB. Expecting selling in the morning off this gap up. There are residual sellers eagerly looking to get out on strength.
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We need to go lower. 2600 maybe 2550. Then the right shoulder forms through a relief rally taking us back to 2800. Then that's it. The fat lady will finally sing. At the end of next year, we should be somewhere close to 2000. I predict by 2020 we will be below 2000 maybe even 1600.
I thought we would go higher than 3000 but market never does what you expect it and that's why it's a market. But I know for sure that the buy and holders will be wrong this time around.
Trading school infomercials, the rise of millennial traders on Reddit going YOLO on NVDA calls, bitcoin newbies, and people thinking AMZN is going to 5000 are never wrong as a gauge that the end is near.
Money will be change hands to the bears in the next few years. Bears Bears Bears!
The market has topped out. At the moment, the market is oversold so it can bounce, but like late 2000 and late 2007, the bounces will be brief and the fundamentals will drive the long term move. It was obvious the global economy was slowing since early this year, its been ignored because of the FANG outperformance but that is no longer the case. You cut off the head of a snake, it still moves but eventually it dies. The FANGs were the head of the snake.
I don’t know how long the bear market will last but the market is overvalued enough that it can easily drop back towards 2200. Below that will be harder, depending on how weak the economy gets. The excesses from low interest rates and a booming stock market has created a debt zombie situation and excessive leverage. Until the Fed starts cutting rates again and stops QT, the equities will be vulnerable to big downdrafts.
No I think there were systematic problems that lead to the last recession such as over leveraged mortgages. This time around I think the problem is more population centered. I think the US is having like a major identity crisis.
The millennial generation are pretty much a loser generation and dominate the workforce. They are busy pretending to be busy or cool and are into social collaboration for the sake of it and not really getting anything done. The ME Too, instagram, selfie generation. Self absorbed fucktards. Also women now control the economy and have most of the positions in companies from lower to upper. Women should be instead inside the kitchen making dinner instead of pretending to think they know how to run a company. What this leads to is lack of innovation and just a general malaise of a population run by feeble minded fags, beta males, social justice warriors, chicks with dicks, and millennial dipshits some of who are soon to turn 40 years old. This will lead to a stagnating economy. There is no hope until all of this shit dies and this will take decades.
Anyways, it's less evident when you look at a very large 10 year scale of the SPY, but it's totally clear on the IWM that the market has topped. Anyone who looks at the IWM and expects it to make another high is delusional.
Also notice that the market tends to be weighted now to a small handful of mega cap stocks that everyone piles into. What happened to diversity in the market. All this capitalization is weighted into a few select names in a horde mentality fashion. When the money gets sucked out of these mega caps, no one is going to start seeing the left for behind no name companies as a saving grace. Everything is trendy nowadays even stock selection.
We are going to be fucked for a while.
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