Today was a very animated day on the markets. We did close higher today, and touted the 975 pts resistance on the S&P 500. However, the market immediately dropped in the AH trading and dropped big time.
I’d say that this day marked a (temporary) victory of the fundamentals on the technicals. If we rose, it was not in virtue of technicals, but rather because of fundamental news perceived (and mark me, I use the word “perceived” on purpose, see this article about perceptions) as positive for a recovery in six months.
Namely, these are the reported success (true or not, but I handled that in several other papers) of the Chinese stimulus, “good” results of various companies and some US stats that seemed to indicate a slowing down of the economic trouble.
But that is all what the market “perceived” or wanted you to perceive:
The hope that the consumer is back. (again) Remember, reality is not reality in the stock market… perception is reality. So you could buy on perception of the upteenth “consumer is ready to rebound” rally in the past 2 years, and you banked some excellent coin. Congrats if you participated. As long as you did not stick around for reality.
However, on the fundamentals, numerous indicators pointed out that this is not a real recovery. I mentioned shipping in a previous paper. I mentioned the incertitude weighing on the Chinese recovery. And today, I’ll point you to the fact that the rail transport in the US also took another move downwards as can be witnessed on the weekly stats of Railfax.
We also had better housing numbers today. Until you look at the painful question of the inventories:
Note: there is probably a substantial shadow inventory – homeowners wanting to sell, but waiting for a better market – so existing home inventory levels will probably stay elevated for some time. There are also reports of REOs being held off the market, so inventory is probably under reported.
This to round up in one conclusion: the fundamentals are screaming to get out of the market. Such levels of valuation increases are not viable on the long term with the current state of the economy.
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FM –
Bit annoyed with this article.
Whether this is just a temporary surge, time will tell. Also, keeping one’s cool does not mean shorting Chinese banks and losing more money. Just because many feel that markets has to go down is no good reason for it to go down.
If one always depends on after/before hours trading to “know” the market direction, its sad.
We have zoomed up like crazy – but there is no technical indicator saying the bulls are tired – many charts show new breakouts everyday. When the market acts “consistently” opposite to your trades, its time to blame your actions/analysis not the markets.
Stick to fundamental news FM.
For those who are “open-minded” not perma-bears or perma-bulls, I suggest reading this nice article.
http://www.financialsense.com/Market/wrapup.htm
indytrader: If we shall stick to fundamentals as you say then I believe the u.s. markets are already over priced. I found the article to be rather good myself.