Nov 16, 2004

Swing trader's market?

I keep thinking about how strong the bearish case was for a sharp drop in the Spring of '04. Interest rates were coming off 50 year lows while mortgage portfolios had grown to an unprecedented size. The stock market was up 30%+ in a year with hardly a pullback. We were at war and it appeared the situation in Iraq would get worse before it had a chance to get better. Despite the stock market's rise and economic growth, U.S. consumers were faced with a growing debt problem and a slack job market. And by the way the only thing keeping long-term interest rates down was the investment of foreigners who were being forced to sit through currency losses to keep their own export markets afloat. And I almost forgot oil prices...

Now with FNM finally getting addressed, jobs trickling in, marginally improved exports, most rate hikes behind us, and strong momentum off the election doesn't the bull case seem equally compelling? Maybe not equally compelling but certainly a good bet.

If the tape did not respond to price breakdowns while the environment was ripe, I am just not sure you need to chase it here. I see no compelling reason to buy until SPX 1140 and even then I would trade a half position looking for a shakeout lower. There will certainly be sectors and stocks that can run for the next 6 months but there will be time to be selective. Too many people here are trying to turn a one day move into a multimonth trend and I just don't think the market is going to be cooperative.

No comments:

Post a Comment