Round Numbers?

To answer several weekend emailer’s questions: I see no reason why momentum wouldn’t carry indices higher short term: Watch Dow 13k, S&P500 1500, and $700 on Gold. (Note that Friday was an expiration day, which tends to wreak some havoc).

These levels aren’t particularly meaningful, other than for some minor psychological factors.  They are big round numbers that make for good headlines. We may see them sooner or later, but the odds favor eventually.

More important are things like the fundamentals (decaying domestically), the trend (upwards), the momentum (still there), liquidity (still sloshing), interest rates (unlikely to drop in the near future) and the earnings (fading).

That’s a mixed picture, with momentum, liquidity and trend overruling (for now) the other, more fundamental aspects.

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  1. sam commented on Apr 23

    now w/ barry turning bullish, finally it looks like an occassion to short..and short big.
    of course, i am just watching all these on sideline in bernanke inspired depreciating cash//


    BR: Those comments are not a sign of turning Bullish — they are a description of what I see happening.

    As the 4052 posts I have made here should make clear, I am more than capable of speaking for myself . . .

  2. Lauriston commented on Apr 23

    With China still going up in spades (2.5% up almost everyday), and yen weakening daily, the momentum will continue. Any pullback will be an opportunity to go long as I am learning fast…

  3. Chris commented on Apr 23

    Stocks have clearly reached a permanently high plateau.

  4. wally commented on Apr 23

    When you talk about ‘mo’ as the reason for going higher, I decline to follow with my cash.

  5. flipper commented on Apr 23

    don’t forget declining dollar and rising inflation

    both good for US equities.

    from the contrarian point of view record short levels and
    large amount of money in bond funds is also good for stocks.

    untill we’ll see relly nasty data the party probably will go on.

  6. Winston Munn commented on Apr 23

    Personally, I’d like to see a nice big correction; the longer this party goes on the more risk builds for a crash instead of a normal correction. I’d like to see a recession this year because recessions are a normal event in the business cycle and are needed every so often to reenergize the economy; the longer we go without recession the more risk builds for depression.

    I’m sure the permabulls think it odd that bearish thinking can have a postive motivation behind it, but continued interference with the natural cycles of the market and the economy can lead to dire consequences. Better to take a small amount of discomfort early than excruciating pain later on.

  7. donna commented on Apr 23

    With you there, Winston. The more unsustainable it all gets, the worse the meltdown will be.

  8. Eric commented on Apr 23

    don’t forget declining dollar and rising inflation

    both good for US equities.

    untill we’ll see relly nasty data the party probably will go on.

    You mean the US equities that are denominated in those same declining/inflation-ridden dollars? If you like having lots and lots of dollars, and don’t care what you can get for them… great.

    Maybe a better way to look at it is that US equities function a little bit as a hedge against dollar inflation, since they tend to go up with dollar inflation. The problem is, there are many reasons for them to down as well–and if they just go up less than inflation, you may be fooled out of recognizing that you are losing buying power! (Maybe the data is already “really nasty”!) So perhaps one ought to look elsewhere for an inflation hedge.

  9. SAM commented on Apr 23

    even gold as hedge is not working..not even oil..
    what is a good hedge?

  10. Si commented on Apr 23

    Agreed Winston, unfortunately thats real world thinking you have going on there. I believe Greenspan basically thought (or was told to) he could stamp out the business cycle and it looks like that thought is still going strong. IMO, Its about votes and happy feelings from overleveraged consumers, real world be damned. Its been going on for a while now.
    I don’t expect a real recession this year as at the first real sniff of one they will drop rates as low as needed…..look at the dollar.

  11. flipper commented on Apr 24

    Eric, yes i meant that equities are inflation hedge, since they pass most of inflation to counsumer. And they are claims on real assets. and future profits from economic growth.

    that’s the long run, in short run they sure fluctuate up and down, but in a upward trend.

    the only sure way to now then to sell in then the market starts falling, if you ar a trader not investor. how you define falling is your personal endeavour.

    Sam, we all have to accept that there is no passive inflation hedge. equites perhaps, but that’s not the case if you have invested in a failed state or economy.

    calculate the present value of one dollar invested at 1% real return around 0 a.d.

    if there was an inflation hedge chances are we would have several persons with that amount of money.

    so the safiest way is a global diverified equity portfolio. perhaps right now it is not the most right time to buy…

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