This is the motto of my blog. Are you a believer yet? Never has this been so true in the past 2 years. The bulls were huge fools in 2008 (and even the bears were too since most covered way too early) with their constant bottom calls and got ran over. In 2009 it was the bears who were equally foolish with their constant top calls and they got ran over.
Despite this monster of a bull market it's still getting little respect. Since I know that the market will make fools of the most amount of people possible I'm always trying to gauge what the sentiment of the trading community is. It seems that last week practically every trader got caught short given the despair that's out there. I continue to believe that the majority of traders have a seemingly unshakable bearish bias - the opposite of the bias that existed in 2000 and 2001. Even the butt sniffing monkey traders who chase anything that moves claiming to play "both sides" are bearish deep down inside feeling more comfortable being short as opposed to long.
Why is it that this bearishness is so ingrained? There are 2 reasons
1) A lot of these traders got burned either in the most recent bear market or the one prior and got converted to the "dark side"
2) They aren't paying attention to the things that the market cares about such as forward looking indicators and earnings trends which have turned up very sharply since last spring. Instead they focus on lagging or coincident indicators like the unemployment rate and take comfort in idiotic notions such as a GS/fed conspiracy to prop up stock prices. This is denial at its finest.
Here are some charts that the I believe the market has been paying attention to for the past 12 months with the last one being the most important.
How many times have you heard people say "the market is disconnected with reality" every time the market advances to a new high? People just don't get how the market works. The market doesn't care about today's reality as much as it does about tommorows and it doesn't care about the unemployment rate it cares about EARNINGS and what they will be in the future NOT what they have been in the past. It will do it's best to try and discount future earnings and therefore forward and conincident indicators that are related to earnings are what matters. So, could it be that maybe, just maybe the market has been rising all this time in response to the sharp rise in the above economic gauges and sharp rise in earnings instead of it being a big GS prop job?
Another weak excuse that I keep on hearing from the permabears is how this bull market has been on "low volume". For fuck sakes bears, come up with a different excuse. You've been saying this since April of 2009 and have been getting your asses kicked ever since. How many shovels to the skull will it take before you realize that volume has been a USELESS indicator? What does the market care about? EARNINGS! That's it! And it doesn't care about what earnings were but what they are going to be going forward. Why is it that there's low volume? Bears say it's based upon unfounded hope by a few optimists. I say it's because so many people are still in disbelief, still burned and shell-shocked from 2008 that they are staying on the sidelines untill it's painfully clear that blue skys are hear again. If anything, the low volume is a bullish indicator reflecting the attitude you see in the first phase of a bull market - disbelief, skepticism, and doubt and here's a couple of new ones...anger and hatred! It's so bizarre how when the market has a strong week, close to making a new 52 week high, that the trading community is reeling instead of celebrating. What does that tell you? Can you honestly say "everyone is bullish" when most traders are losing money during a strong market? I also get a laugh when I see permabear types who have been wrong for months try to play contrarian saying "everyone is bullish so it's time to be bearish" Hello??? What about you? It's also funny how these guys tend to think that they are smart money, that they are the "contrarian" and it's just a matter of time before the "sheep" get slaughtered. Little do they realize that these "sheep" got slaughtered in 2008. They capitulated in droves and they haven't come back even though the market has surged for 12 months. So guess what bears "YOU'RE THE SHEEP!"
I know I sound really arrogant and hurtful in this post and I'm asking for a spanking by Mr. Market but I'm just venting here. Don't worry, I've been around long enough to know not to get cocky and kick people when they’re down and trust me, I'll easily trade in the bull suit for a bear one if need be, but in my view, it's the bears who are the cocky and arrogant ones because they stubbornly refuse to capitulate after getting it wrong for so long. I find that guys like Prechter, Roubini and Gross are still highly regarded. I'm waiting for the day when at least 1 of them gets ridiculed for their bad calls like Cramer did in March 2009 on the Daily Show. Cramer's public humiliation on that show has to go down as the best contrarian indicator of all time!
So, what will we see next in the ST? We are extremely ST overbought now and so sideways or down action is likely for a few days at least. I wouldn't be surprised to see just that followed by a stab to 1150 or marginally higher. After that, we head back to 1100-1115. That's my best guess as to how things will play out in the weeks ahead but it's just that....a guess and I'm not going to be betting on it....I'm doing just fine with my individual plays and I'd rather stick to them instead of playing a guessing game of chicken with other traders. If it ain’t broke don't fix it as they say.
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