Like i've been suspecting lately, i think that Tech (QQQQ) would be the laggard if a bear market is to come about and DIA would be the leaders if we are to have a bull market. Today we are seeing a bear market and a huge hit on the overvalued stocks in tech, most notably GOOG, RIMM, BIDU. these crazy stocks have resisted all the fears that were in the blue chips and small caps and now, all in one day, they get hammered. I've seen strong down moves like these before with a huge rebound the day after or even during the last hour of trading, but i am more sure of a downturn than before. i love the greed and total confidence the market and analysts have in the big tech. it means that the runup is so much into just emotions and speculation that these quick buyers will also be quick sellers. little support by those guys. if i am wrong about all this, i will be the first to admit my faults.
reasons for bearishness:
1. crazy expectations for earnings. in the past, stocks selloff when earnings are missed and shoot up when earnings hit or exceed. now, all stocks sell off whether earnings hit or miss. The only stocks that shoot up are the ones that blow all estimates away AND raise guidance for upcoming quarter.
2. rise and fall of chinese stocks. they have risen exponentially in the past several months and lately have started to form double tops and divergence. some highflyers like cbak, jrjc, and ldk have already lost much of their gains from the last quarter. another bad sign is china wanting to slow their economy by tightening of restrictions on foreign investments. this will slow growth for US companies.
3. as many have mentioned but many have ignored, interest rate cuts are only short term solutions. the market has to correct itself and interest rate cuts are just messing up charts and preventing the inevitable. it is time for the market to take a huge correction and figure itself out. bernanke is screwing up everything! he needs to place importance on the value of the dollar, not on the stock market.
as i write this, i wonder if i am just in fear, or am i totally realistic on my valuation and aggressive buying of PUTs. only the market knows and the truth will soon reveal itself. the downfall of stocks have recovered slightly at this moment and much of the bleeding of the huge names have stopped. we'll see if this is the quiet before the storm or a rallying of troops before a huge push to erase all of today's losses. i'm hoping for a storm.
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