Blurb from Bloombergs/Schwab's magazine "On Investsing"
[xxxxx] = my comments
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If the short-term fundamentals appear favorable in the economic and interest rate arenas, then why aren’t stocks rallying? We think the answer lies in some of the technical trends in the stock market.
Plain and simple, investors have been too optimistic. Various gauges of investor sentiment-ranging from surveys of investment advisors to trends in the options pits-suggest that market participants are too complacent, even thought the stock market averages are badly lagging the returns of the previous five years.
Paradoxically, it will probably take some sort of adverse event [catalyst] to scare enough people out of the market so a long rally can begin and be sustained. This event may be a dramatic shift of power in the fall elections, a $40-per-barrel price of oil, a recession in Europe, or another clash in the Middle East.
Once investors rush to the exits [capitulation], we’ll be ready for the trigger. At that point, the positive fundamentals of solid economic growth and low interest rates should pave the way for a double-digit move to the upside over a period of 6 to 12 weeks. I would expect that financial and technology stocks will likely lead the way.
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Seems to be reiterating what we have been saying here all along. However, as a semi-contrarion I think this makes a big point. Many others are probally reading the same articles and rhetoric and take every selloff as capitulation. But investor knowledge is low and perception is too positive. These selloffs and downturns the market is experiencing are perceived to be capitulation but are small in comparision to the true capitulation that is looming. |
