Still in favor are Dec 2011 SPY LEAPS of various strikes, and today I’m eying market darlings Apple and Goldman. The chatter on these two being recession-proof is reaching a fever pitch, and while there is a kernel of truth to that story, their stock prices leave no room for error at these levels. Actually, even if these companies continue to prosper, their stocks will deflate as the market assigns lower multiples to the earnings of its strongest as well as weakest components.
REITS (proxy IYR) can’t hold up much longer either, their short-squeeze having run out of steam while rents start to plummet in earnest.
The question of the summer is how high this market will go while the global reprieve in mood lasts. That the NASDAQ is leading the pack reminds me of late 2007, when the market had started to roll over but the “tech horsemen” (AAPL, RIMM, AMZN, GOOG) kept on rising, against all reason. The fact that it has already reached such heights is a big warning sign. It has almost filled its October gap, a very nice target for a corrective bounce.
Above chart from google finance. BTW, check out wikinvest if you get a chance. It’s got a lot over google and yahoo’s stock pages.
Elliott Wave theory holds that corrections move in three waves (impulse moves in five), so this current push could be viewed as the C-wave in an A-B-C move. When it exhausts, a sea change may ensue, not just a minor reversal. With no fundamental support above SPX 400 (and weak support there), just such a paradigm shift is very much on the table.
I see no reason why we will hit S&P 1200 / Nazday 2300 / Down 10000 before they roill over to the down …
Correction:
I see no reason why we not will hit S&P 1200 / Naz 2300 / Dow 10000 before they roll over to the down …. in 2009 / Early 2010
I would agree on the overvaluation, but then again, the whole market is overvalued. I’m really short, but i’m also a big worried because this rebound seems to have no end and thinking of the only times JM Keynes made sense: “the markets can stay irrational longer than you can stay solvent”
Pej: Sorry to hear about your situation. We will have 5 weeks of up and up so be carefull … but, we need this next stage of irrational bullishness to set us up for hte next plunge down … it’s how things work. Markets are never rational …
That’s right. The markets are rarely rational, and then only as a stopped clock can be right.
If trading from a short-term perspective (like with levered ETFs, short term options, plain vanilla shorting, or futures), you have to use tight stops at key levels (however you determine them) and be ready to sit it out until you get another set-up.
I prefer to trade with a horizon of at least 18 months, if not 24 or 30, so that the drawdowns are less severe and I have plenty of time to be right.
I agree guys. I have a longer term horizon, and I am adding to my shorts when markets make new highs. My hedges worked quite well until June which was a bad month for my portfolio, but july seems to be better. Also, I am liquidating some short term long position I was lucky enough to be around the lows of March.
Good luck to all.
Mike, I don’t see which bubble you are talking about. The Nasdaq has only had its 12th up day in a row and the crisis being obviously over, i don’t see any problem. And the fact that M$ profits felt 20% while they have the biggest monopoly in the world and is one of the most relevant companies in terms of corporate and individuals spending doesn’t mean anything.
By the way, what strikes are you buying? At the money?