I am officially confused...the market is crazy...most especially so is the QQQQs...it erased most of its losses (if not all of its losses) from last week's breakdown of the markets and seems to have much more strength to it. Last week...after the breakdown, i was very sure that technicals are finally going to make sense and the market will make a strong pullback from its huge uptrend...i had many reasons to believe it too (which will be mentioned below)...therefore i got out of almost all of my positions (GOOG, FXI, EEM, EMC) because of the bad risk / reward in my options (calls). but come yesterday and today, the market seemed to have shrugged it all off and off to its annual 4th quarter rally. despite how hard it was to stay out of the market for AAPL and AMZN's earnings, my skepticism for this week's rally and my confusion of the overall technical picture has gotten me sidelined. The only thing i am fairly confident about is the downhill spiral of oil and gas-related stocks (USO, XOM, XLE)...since i can't make up my mind, i am staying with a current mindset that CASH IS KING!
below are my reasons for an upcoming bearish trend and my reasons for a bull trend.
BEAR because:
1. defaulted loans, no liquidity and less money for major financial institutions and regular traders. many people are defaulting and in this problem, about 1.1 million people. that is a lot of money taken away from companies and investors involved.
2. major runup of stocks mean no possibility for the earnings of most of the companies to balance it. google and amazon are strong examples of it. never before have i seen so much negative reactions to dim outlooks in the next quarter's earnings.
3. the interest rate cut we had and the others that will come ahead don't solve anything. these rallys because of rate cuts are always brief (when compared to history) and aren't solutions to long or medium term problems. in the past, these rallys occur, then fail, leaving the market in worse shape than before the rate cut.
4. many bulls, especially technical bull traders are fearful and skeptical.
5. the divergence and super-underperformance of S&P, IWM, and DOW compared with QQQQ shows a lack of agreement amongst the bulls. one market alone cannot carry the weight of the whole economy.
6. Divergence in technical oscillators is occuring in many stocks in many different sectors of the market.
7. many speculation plays (i.e...china and solar stocks) have occurred which usually marks the end of a rally.
BULL because:
1. there is a strong bull rally going on. trends have more possibilities of continuing than reversing.
2. it is impossible to spot tops. we can only have thoughtout guesses.
3. oscillators are secondary signals and are not strong enough, by themselves, to be pure buy or sell signals.
4. maybe the worst of the credit disaster is behind us. the bad has already been factored into the stocks.
5. my fear is making me bias. i can't see things as they really are and because i got burned last week, i feel that it can happen again so i rather stay bearish than go bullish and be aggressive.
6. the credit problem was and is over exaggerated.
7. maybe we cannot put so much emphasis on the American market when looking at stock evaluation because the world is so much more global now. with china and other countries being in big profits for our companies, a slowdown in America might not necessarily hurt their bottom line.
I got a good feeling that tomorrow will be a down day for all the major indexes. a little rebound was expected from last week's huge down day and that just occurred...so its time to resume the pullback. also, after hours trading for most of the tech names have been down after AMZN's earnings call. but who knows...i don't trust this prediction enough to place my own cash into it so i recommend u don't either.
No comments:
Post a Comment