Louis - More like pineapples to eggplant IMO. If it was easy to figure out, you and I would have nothing to do today ROFL
Right on about the option traffic, another reliable tell-tale sign.
Re: your remark about a "mis-perceived" bull in micros - don't think I would describe it quite that way, bull money has been going there, no denying that. But I agree that this little bull might be on very weak legs, formed when people looked away from the former market leaders and saw better numbers and therefore better "value" in small caps.
As you implied, this kind of value search is a mug's game, because you can't justify one investment as worthy simply on the basis that the alternative is over-priced. Both candidates may be currently unsuitable for long term investment at these levels - the fact that one group (the large caps) remains blatantly so just contributes to the illusion.
The "comparative" logic reminds me a great deal of posts I would read early in Y2K from people claiming that a $75 XXXX was a bargain at PE 90 because its peers YYYY and ZZZZ were trading at PE 135. Buy 'em, buy 'em, buy 'em. Now XXXX, YYYY and ZZZZ are all penny stocks, and they still don't have any E, and probably never will.
Based upon the phases of the cycle I posted before, I'd say we're approaching the point where this newborn small cap bull (on its post-blowoff, Fed liquidity-induced bounce up) will collide with the late stage large cap bear (which is still on its way down). This will be more evident in some sectors than others, but it should be particularly substantive in tech - my read of the MACD and RSI on the weekly SML chart is that a cyclical top fast approacheth.
The colliding forces scenario suggests we are entering a phase where all indices should fall. Here's a possible sequence - as economic conditions leave the DCB from the Fed 9/11 pump behind (where we are now IMO), informed forecasts start to take a turn for the worse (translation: worse = more realistic). These revised forecasts become perceived as being not just bad, but devastating for large companies. This in turn leads even optimists to admit such harsh conditions cannot possibly be good for little guys.
That leaves nowhere to run and nowhere to hide, except maybe cash or an exit out of the currency entirely, i.e. into gold. As the data and related forecasts get gloomier, the government and Wall Street continue their pleas to stay the course, although they are hardly unbiased with that advice. Bottom callers emerge, but they are too early.
Sounding familiar already, isn't it? IMO it will only become moreso over the summer.
It's not like I'm totally sanguine about this process. I fully realize they could drop the whole bucket of water on the way back from the well instead of just the usual cyclical few drops here and a few splashes there. And if they drop the whole bucket and crash the thing, the 1930s might look attractive by comparison. I'm not currently THAT bearish, but I have to tell you that my opinions remain fluid on a daily basis on that subject.
Another favorite phrase of mine: Hope for the best, but plan for the worst |
