re: economic recovery
I think we'll continue to see "apparent signs" of recovery in the economic numbers, but like you, I think it will only be a bounce and not the real thing.
Lest readers simply conclude that I am a permabear, I will honestly state that I simply can not make an argument for a recovery in the US economy.
At this point, I do not believe that the US economy will recover any time soon. I do not believe that we will enter a period of relatively stagnant equity price action as earnings catch up to price. I do not believe there is much upside left to this rally.
As for the economic bounce that is forming here, I can see how that could proceed. Consumers are determined to go beyond any reasonable limit in personal liabilities, so I expect spending to remain fairly strong. All of this will be in the face of a continuing slow rise in unemployment. On the corporate side, I expect a bounce in capital spending for tech only, as a small upgrade cycle is bound to kick-in soon.
Of course, the backdrop for this bounce is the constant flow of new dollars, beyond what most of us thought was possible, even after witnessing the previous excesses. It is a source of lively debate how much of this new money ends up flowing into the markets, equity and otherwise, but I think it is higher that most believe. Corporate borrowing and capital spending is stagnant, so it ain't going there.
re: this rally
What about this stubborn rally in equities? I expect it to push some more -- enough that the swing trading bears finally capitulate and the chart-chasers all get on board. I think we saw some of both at the end of this past week and we have the great breakouts on the charts to back it up.
I do not think there is much upside left to the rally. Sure, you can always find a glamour stock that's up 17%, but that's for gamblers; the indices themselves have done squat since Dec 6. Buying at this level is a fool's bet imo.
In November I had projected a tradable high in early December and had posted that map many times. I suppose one could say we got it, but the decline was not as deep as I had thought it would be. So, time to re-think and get ready for the next swing opportunity. That opportunity will be for patient shorters. |
