Bilionaire George Soros is very negative Billionaire George Soros has been quite vocal about his suspicions in the sustainability of this rally. Soros said: | \"It\'s a bear-market rally because we have not yet turned the economy around. This isn\'t a financial crisis like all the other financial crises that we have experienced in our lifetime.\" If you go out more than a few months, all signs point to Soros being spot on. There are just too many problems to work through and an unwillingness to accept the inevitable solutions. Despite it all though, it\'s looking much more likely we\'ll see more upside in the short-term than the start of a downturn. Why? Because we haven\'t run through all of the phases of a bear market rally. Three stages of a bear market rally Bear market rallies are unique events. They come when they\'re least expected. That can last a few days, weeks, or months. There\'s no telling exactly when they will end. But if you pay attention to the life-cycle of past market movements, you can get a good idea of when this one is going to end. That\'s why I closely watch the three stages of a bear market rally: Stage 1: \"It\'s all over\" The first stage of a bear market rally starts when the markets react to bad news as if it was good news. Whether it\'s because bad news isn\'t as bad as expected or it\'s one of those \"Green Shoots\" that provide a glimmer of light perceived to be the end of the tunnel. This happens when everyone thinks it will never turn around. It\'s when many investors throw in the towel and proclaim \"it\'s all over.\" We hit that point in early March. Since then the markets have been so beat up in such a short period of time that any bit of good news can get things rolling higher again. Stage 2: Popular declaration of bear market rally This is the stage where most commentators admit we\'re in a bear market rally. The upswing has just been too strong and has lasted so much longer than initially anticipated by most, it\'s obvious to everyone. There are no fundamental drivers and the fundamentals matter very little in this stage. Dividend yields, P/E\'s, growth, and forward estimates aren\'t focused on very much. The prevailing \"thesis\" (i.e.stimulus spending will be great news for infrastructures stocks) is much more important than the underlying fundamental situation ? a.k.a. reality. Most everyone goes on to warn this is a bear market rally and advise against buying too much of anything now. It\'s also a time when we hear things like \"this is a trader\'s market.\" Which any market should be a traders market, given the wide number of strategies that work in bull, bear, and flat markets. Stage 3 ? \"All clear! Get in before it\'s too late.\" This is the final stage. It\'s when the bear market has been forgotten by most. Stocks move up, but the big upswings have disappeared. This is when the very real risk of \"panic buying\" sets in. This is a result of the big money fearing 1) it has missed all the chances to buy low, 2) their performance will suffer, and 3) customers will take their money elsewhere. To make up for lost time, they buy very aggressively. Many of them think short-term and want to deliver the numbers to keep pace with the competition in the money management industry. This is an extremely profitable stage for those who went against the grain and bought during the earlier stages of the rally. You\'ll also see a general decline in the VIX. It currently sits at below 34 ? well below its recent range of 50 to 90. Yet when the big money runs out of cash to buy shares, watch out, the end of a bear market rally is near. What to do now It looks like we\'re in Stage 2. There are just too many non-believers out there right now, too much money on the sidelines yet to come back into the market, and there has been no build up of false confidence which precedes most market declines. Just think of what happened last fall. After a sharp downturn, the markets rallied sharply after the presidential election. The so-called Obama rally was a boon for stocks that were looked at as leading benefactors of the new administration\'s agenda. Don\'t get me wrong, there are still a lot of problems. Commercial real estate debt, deflation (and the debasing of currencies to prevent it), rising unemployment, and increasing and changing regulation to consistently change the rules and keep entrepreneurs and investors from tackling new opportunities, will all be a drag on the economy, at every stage of a recovery. But, as the markets have shown, a bear market rally is not something to bet against. As a result, I recommend searching out three types of Oportunities. One being the safe ways to play a market rally that go up with the markets, but don\'t go down nearly as fast (e.g. a covered call writing ETF). Another one being the sectors that have fallen out of favor during this downturn. The final being speculative stocks that have been so beaten down there\'s only one way to go - up. The old Wall Street saying is a rising tide lifts all boats is true. But when the tide is rising this fast, the most beaten up boats that were steadily sinking (think banks, homebuilders, commercial real estate, etc.) have been rising the fastest.
For this coming week, my bet is that STI will still continue to move northwards. Huge amount of liquidity is flowing into the market and I would believe the mid-large cap stocks still have legs to run. All the technical indicators are saying that the markets are overbought but the upward trend remains intact. As BNP said, let\'s sti tight for 2,500!
hmmmf.. im not so sure about whether the STI could really hit 2,500 or not, but considering what tony has said, i believe his insight into this rally can prove to be rather valauble. So it looks like the mid-cap stocks still have some room to go up as the upswing is still strong, and with the US data coming on not that bad, i suppose that would be a bit of a good news to continue pushing the index up for now. Big upswings for the big stocks seemed to have simmered down, and the mid-caps are still in the midst. If Tony is right, this rally may last for another 2 weeks to be conservative. If a correction is to occur soon, how much would the magnitude be? Would we be seeing something like the previous round where the STI comes down to 1,800? Or will the correction be shallow given the amount of liquidity. What\'s your opinion of it? Should we continue to hold onto the stocks or secure our profits first, esp for speculative stocks that have risen fast & furious, ro wait for the next opportunity? I am still weighing on which option is the better one.
i read article on george soros in this thread. looks like the guru has been proven wrong! the singapore guru - mr gabriel yap - is bullish. he sent email to people today: Hi Guys, The stockmarkets, as predicted earlier, had gone to greater heights in the past three weeks when I was away riding my horses in Australia. M refreshed from the beauty of the Dandedong ranges and the rivers and creeks of Mansfield and back to enjoying the stockmarkets as more data points have emerged to fuel the market\'s confidence on the outlook ahead. For a deeper analysis of what lies ahead, kindly tune in to my upcoming TV interviews:- Wed 5th Aug 8 am Prime Time Morning on CNA Thu 6th Aug 10.30 am Bloomberg Edge on Bloomberg TV Fri 7th Aug 10.10 am Cash Flows on CNBC Its good to be back, so lets ride the bulls together. Gabriel Yap, CFA
More talking heads trying to predict the direction of the Stock Market. An investor would probably find his time more well-spent if he researched and read up on sound companies and tried to purchase them at fair prices for the long-term. Too many fortune-tellers and prognosticators make up the \"noise\" which spills out of the TV and radio every day. Investors should so themselves a favour and just screen/filter them out; just take in the relevant industry/business news for important decision-making.
hmm my view is that we should not be too happy yet, even if asian bourses have rallied to a high, we do not know how long this scenario can last. Roubini, the fortune teller of wall street, has indicated that rally can continue till end of the year, but we may see another recession in 2010/2011. We cannot turn a blind eye to the risks involved, especially if we are the type of risky investors. For sound investors like musicwhiz would have no worries on the market flunctuations. For me, I have to weigh my options very carefully and make the best bet. Equities are risky instruments, you may get to win it all or lose everything.
