So Do Things Look Bullish or Bleak?
Bullish or bleak? When it comes to the economy and most markets, you can almost always find someone to support either. Today's no different.
With U.S. markets closed for a national holiday (President's Day), we've got a few spare minutes to put in our two cents. So what are yours? Are you in the bullish camp pumping up your fellow citizens' spirits or have you joined the fearful not-so-few who've been pulling money out of stocks even in the face of this rather robust run-up in prices?
Pulling money out? How can that be when the Dow Industrials, Transports, and the S&P have basically taken a shot at the moon after their fall into the pits in December? Well, the Bank of America reported outflows from stock ETFs and Mutual Funds in 10 of the last 11 months. In the last week of January, $12.1 billion out of stock ETFs, $2.9 B out of Mutual Funds.
That's a lot of money, honey. But it hasn't put the dampers on those who believe that the U.S. economy continues to hum along very nicely, thank you.
When it comes to the rest of the world, the story's different. It's weakness just about everywhere, at least in the major areas of the EU and China. Oh, you'll find a spark of interest in Emerging Markets. (Ever notice that there's no "South American" market? You'd think there would be at this point.) After collapsing in December, they've bounced like a Spaulding. Naturally, the stock touters can't get enough of them. So buy EMs if that makes sense to you.
Frankly, you can make arguments for bull, bear, or even, for that matter, bleak. Here's one take on all this.
The best a bull can hope for at this point: a "Melt-Up." We've talked about this. It's still on the table. The argument: There's been no "manic" Third Phase of this historic stock bull market. That's where everyone (including the cabbie and the shoe shine guy) all tell you they're investing in stocks. Prices shoot for the moon; then they collapse. The last time we had a nice, clean Melt-Up was during the tech boom. In 1999-early 2000 "everyone" was buying tech stocks. People made bundles of money - in some cases millions. Then they lost it all when markets tanked. Tech stocks fell off a cliff and eventually dragged the rest of the stock market down with them in a three-year bear market.
Bears have a better shot at making money. After all, this historic bull market has to end at some point, right? And it is rather long in the tooth, right? The only problem here is timing. To make money in bear markets (vs. not losing money), you've pretty much got to short stocks. Can you do that with some skill? If so, you're exceptional. Such people exist, but they're few and far between. If you're like most of us, you'll try to short, get caught in a short-squeeze (a common phenomenon in a bear market), buy back your shorts at a loss. Hmmm. Not my cup of tea.
As for "bleak," well we've always got the gloom-and-doom, TEOTWAWKI (The-end-of-the-world-as-we-know-it) crowd. Some of us get a bit of schadenfreude when it comes to gloomy, apocalyptic scenarios. But whether you feel good meditating on such scenarios or not, it's probably not unreasonable to imagine things getting out of control under certain conditions. One such scenario would be a credit crisis sparking up in China, spreading to the rest of the world, accompanied by increasing tariffs on international trade - something akin to the Great Depression. It's not likely, perhaps, but it's not impossible.
There are, of course, other scenarios as well. But it's hard to see a lot of really positive outcomes going forward. Yes, the U.S. economy - relative to the rest of the world - looks OK (to some). But are we heading into boom times at this late stage? I'm not betting the ranch on it. Maybe you disagree.
What about those charts we posted last time? Do updated versions help us here? I don't see it. If you update the Dow Industrials, you find that they did cross above the 200-day moving average, and it looks like that MA now provides support - meaning the cross could be a more permanent bullish one. The Transports (the Industrials partner in Dow Theory) don't show the same degree of strength. And neither has give an outright bull signal.
The S&P, on the other hand, just managed to cross above the 200-day on Friday. And with today's market holiday, there it sits. Will it stay above, or slip below? This week should provide some answers. But so far its not confirming the Dow Industrials.
So, yes, the market's been playing mind games lately - as it loves to do. As for making sense of it, maybe we just say "It is what it is" and keep watching for something more definitive.
Meanwhile, it's back to holiday time. I could use the break.
With U.S. markets closed for a national holiday (President's Day), we've got a few spare minutes to put in our two cents. So what are yours? Are you in the bullish camp pumping up your fellow citizens' spirits or have you joined the fearful not-so-few who've been pulling money out of stocks even in the face of this rather robust run-up in prices?
Pulling money out? How can that be when the Dow Industrials, Transports, and the S&P have basically taken a shot at the moon after their fall into the pits in December? Well, the Bank of America reported outflows from stock ETFs and Mutual Funds in 10 of the last 11 months. In the last week of January, $12.1 billion out of stock ETFs, $2.9 B out of Mutual Funds.
That's a lot of money, honey. But it hasn't put the dampers on those who believe that the U.S. economy continues to hum along very nicely, thank you.
When it comes to the rest of the world, the story's different. It's weakness just about everywhere, at least in the major areas of the EU and China. Oh, you'll find a spark of interest in Emerging Markets. (Ever notice that there's no "South American" market? You'd think there would be at this point.) After collapsing in December, they've bounced like a Spaulding. Naturally, the stock touters can't get enough of them. So buy EMs if that makes sense to you.
Frankly, you can make arguments for bull, bear, or even, for that matter, bleak. Here's one take on all this.
The best a bull can hope for at this point: a "Melt-Up." We've talked about this. It's still on the table. The argument: There's been no "manic" Third Phase of this historic stock bull market. That's where everyone (including the cabbie and the shoe shine guy) all tell you they're investing in stocks. Prices shoot for the moon; then they collapse. The last time we had a nice, clean Melt-Up was during the tech boom. In 1999-early 2000 "everyone" was buying tech stocks. People made bundles of money - in some cases millions. Then they lost it all when markets tanked. Tech stocks fell off a cliff and eventually dragged the rest of the stock market down with them in a three-year bear market.
Bears have a better shot at making money. After all, this historic bull market has to end at some point, right? And it is rather long in the tooth, right? The only problem here is timing. To make money in bear markets (vs. not losing money), you've pretty much got to short stocks. Can you do that with some skill? If so, you're exceptional. Such people exist, but they're few and far between. If you're like most of us, you'll try to short, get caught in a short-squeeze (a common phenomenon in a bear market), buy back your shorts at a loss. Hmmm. Not my cup of tea.
As for "bleak," well we've always got the gloom-and-doom, TEOTWAWKI (The-end-of-the-world-as-we-know-it) crowd. Some of us get a bit of schadenfreude when it comes to gloomy, apocalyptic scenarios. But whether you feel good meditating on such scenarios or not, it's probably not unreasonable to imagine things getting out of control under certain conditions. One such scenario would be a credit crisis sparking up in China, spreading to the rest of the world, accompanied by increasing tariffs on international trade - something akin to the Great Depression. It's not likely, perhaps, but it's not impossible.
There are, of course, other scenarios as well. But it's hard to see a lot of really positive outcomes going forward. Yes, the U.S. economy - relative to the rest of the world - looks OK (to some). But are we heading into boom times at this late stage? I'm not betting the ranch on it. Maybe you disagree.
What about those charts we posted last time? Do updated versions help us here? I don't see it. If you update the Dow Industrials, you find that they did cross above the 200-day moving average, and it looks like that MA now provides support - meaning the cross could be a more permanent bullish one. The Transports (the Industrials partner in Dow Theory) don't show the same degree of strength. And neither has give an outright bull signal.
The S&P, on the other hand, just managed to cross above the 200-day on Friday. And with today's market holiday, there it sits. Will it stay above, or slip below? This week should provide some answers. But so far its not confirming the Dow Industrials.
So, yes, the market's been playing mind games lately - as it loves to do. As for making sense of it, maybe we just say "It is what it is" and keep watching for something more definitive.
Meanwhile, it's back to holiday time. I could use the break.
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