The upward trend will continue after market manipulators finish selling in the beginning of this week. Institutional and individual investors do not participate in the selling and welcome the rally although the portfolio is only lightly loaded. Market participants continue to have little confidence in equity stocks. But earnings improvement and surge of global wealth will drive share price.
Market participants will continue to trade within a range which is moving upward. Last year, market manipulators had a large portfolio to sell from the year peak and began short selling using the insider knowledge of US rating downgrade. A lot of profit were made. But this year, the same strategy did not work because market participants are waiting with cash for sell-off instead of selling during market panic.
Market will oscillate as smart traders buy low and sell high on speculation. It is difficult to time the market. Investors can allocate funds to buy in small increments when market retreats and take profit in increments when market advances. More aggressive speculators can follow market movement for swing trading based on capital flow with consideration of macro economic condition.
Market participants remain fear of market crash. Market manipulators have access to insider knowledge of news and information that may move market significantly. Hot money in financial market will create turbulence in equity stock market.
Why Euro Isn't Headed for a Collapse
The euro is hovering near multi-year lows against the U.S. dollar and the Japanese yen as a slew of negative news cements bearish sentiment towards the single currency, but analysts tell CNBC there are signs of resilience in the euro and a collapse is unlikely.
Ratings agency Moody's late on Monday changed its outlook for Germany, the Netherlands and Luxembourg to negative from stable, while concerns grow that Spain may need a financial bailout. This has triggered talk that the currency could soon fall below the critical $1.20 level.
But Sean Callow, Senior Currency Strategist at Westpac says that so far the euro has withstood the pressure well.
'Crazy' Not to Own Regional Bank Stocks: Dick Bove
It's crazy not to own the regional banks right now, Dick Bove, banks analyst at Rochdale Securities, told CNBC's "Squawk on the Street" on Monday.
"The quality of earnings is extraordinarily high," Bove said of the regional banks. "It's coming from more loans and more deposits."
It's hard to assume that these stocks are going to go up so long as people refuse to look at the earnings," he said.
In general, Bove said, "The problem with bank stocks is not anything to do with earnings or the structure of their balance sheets, the problem with bank stocks is that people don't believe any of the numbers associated with this group of companies."
He added: "If no one cares about how much money these banks make and no one cares about what the growth rates have been coming out of the recession, it's very difficult to see what's going to them to buy the stocks."
VIX Will Burn Investors Waiting for a Market Crash
As tense as the stock market, the economy, or even the election seem right now, it's hard to argue that fear isn't just a smidge ahead of itself. In fact, that's exactly the case being made by Ryan Detrick, Senior Technical Strategist at Schaeffer's Investment Research, who says the ''extreme worry" out there makes for the "ultimate contrarian play." Simply put, he says too many people are positioned for higher volatility as measured by record open interest in the VIX.
A large part of Detrick's conviction is based on history. Not just long-term performance of the Volatility Index itself, but also historical volatility, which he says has ''totally imploded."
"[Historical volatility] is down 80% since the financial crisis [in 2008] and down 50% since last summer."
He says simple year-on-year price comparisons are inaccurate and do not reflect ''off-the-charts" buying and attempts to pick the bottom. "We think the crowd could definitely have it wrong and volatility could slowly continue to trickle lower."
"We still think the upward trend since '09 is still firmly in place."
Why TrimTabs' CEO is 100% Bearish
Despite Mario Draghi's reassurance that the ECB will do everything in its power to save the euro zone, Europe is not going to do anything meaningful and central bank action will not save the equity markets - on the contrary, they'll "implode", Charles Biderman, Chief Executive and Founder of TrimTabs Investment Research, told CNBC.
"The fundamental problem in Europe is that the economies [there] are not generating enough taxable revenues to meet current bills, let alone growing future entitlements and let alone the huge stack of already molding debt that exists," he said. "In the face of that, I don't know what else they can do but talk."
Biderman was not only pessimistic about Europe, however, adding that another reason to be bearish was the faltering U.S. economy, low gains in wages (barely above inflation, he said) the jobs market and the Federal Reserve's strategy.
Biderman defended his 100 percent bearishness on equity markets, saying that central bank interference in the markets would not last, and could do permanent damage.
"I'm not saying that the world is going to zero, I'm saying that the companies that have been profiting from the central bank rigging of the equity and bond markets, will suffer as those markets implode."
Market Is Having a Very Good Year...Really!
My asset class is out of favor, but the performance isn't bad. When I talk to friends about the stock market these days they look at me sympathetically, like I have a painful skin disease.
"Must be hard for you, covering all that depressing news," they say.
"Well, it is sometimes depressing, but we're having a pretty good year," I respond. "The U.S. stock market is having one of its best years in a long time."
"You're kidding," they invariably say.
No, I'm not kidding. The S&P 500 index is up over 8 percent year-to-date. That is better than most years, in fact it's the best first seven months of the year performance since 2009. Before that, you had to go back to 2003 to get a better performance.
And yet, no one seems to believe that the stock market is having a very good year.
Part of the problem is that everyone seems to be underperforming in some way. Hedge-fund traders routinely complain to me that sharp intraday moves and the constant meddling of central bankers in the markets make it impossible to buy stocks purely on fundamentals.
Mutual funds seem to be having an even tougher time. JPMorgan Chase noted this morning that the average large-capitalization mutual fund is trailing the S&P 500 by 111 basis points. That is a lot.
Only 13 percent are beating their benchmarks by more than 250 basis points (normally 26 percent beat), and 32 percent (one in three) are underperforming by more than 250 basis points, the worst performance since 2008.
How to explain the underperformance? Most likely it's because the April-May swoon in stocks caused investors to become more defensive, which left them underperforming when the S&P staged a nice rally in June. Ouch.
No comments:
Post a Comment