Yesterday, we saw the momo stocks just get destroyed, with the Musk stocks (TSLA and SCTY) leading the way. The charts are now damaged, and will need time to repair. They should be buys in a couple of weeks. I think you need to buy today, as we are getting the first meaningful down day since the debt ceiling deal. It will get bought. As I write this, the futures are already climbing back from the knee jerk selloff on strong numbers. The next one day selloff is the one to avoid, not this one.
Friday, November 8, 2013
Topping Process Starts
This is the beginning of the end. Of the TINA bull market. There is no alternative. People are not enthusiastic about stocks, but they also see how it goes up everyday, in a 5 year uptrend, and with a weakening bond market, they are piling in. The inflows will not last. There is a secular shift to investing in bonds from stocks. It is due to an aging population in developed economies, seeking safer assets. And no, gold is not a safe asset. That is why you are getting a highly unusual downward reaction to a blowout jobs number. Traders know that the Fed QE meme is much stronger than the stronger economy meme.
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2 comments:
I think today is the first time that equity is distinctly decoupled from the other markets (i.e. bond, gold, USD) towards the expectation of QE tapering. I mean only equity has changed its reaction towards QE tapering. Equity is no longer dropping but is surging up instead, while bond yield is still rising, gold price is still declining and USD is still rising.
Your thoughts? Thx.
I don't believe we are decoupling because I never believed the stock market was highly coupled this year to the USD, bonds, and gold to begin with.
Stocks have strong inflows, with a huge pool of buyers waiting for a dip to buy/cover. I don't advocate shorting stocks yet. But we are getting to a point where stocks are not safe, meaning the market is quite complacent, which leaves it vulnerable to out of the blue one day whackings like yesterday. I cannot buy stocks in such an environment.
Thus I am neutral now, but do think bonds and gold wont't keep selling off, because the Fed will likely not taper continuously, with a so-so economy.
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