Is this June 2010 or 2011? The reason I ask is because I'm noticing talk of double dip again in the financial media. Watching "Market call" on BNN one emailer asked the guest "does the market pullback suggest the beginning of a double dip?" And it's not just this emailer who's concerned, it's everywhere. For Christ sake people, the market has dipped about 6% after making a 100% gain in less than 3 years! It wasn't too long ago when people were moaning and groaning about how the market had "gone too far to fast" and now that we get a decent pullback everyone's worried about a double dip. Sure, the data is suggesting a slowdown but let's remember a couple things. A lot of those economic guages like the ISM hit 20-30 year highs earlier in the year and so there's really only one way to go and that's down....but that doesn't doesn't mean it will swing to full blown contraction. It could simply suggest going from 6th gear to 5th or 4th for a while. And how much of this soft patch is due to Japan?
Then there's all this chatter about Greece and the potential for a "Lehman event" which to me tells me it's something not to worry about. Nobody wants another Lehman event and despite all the bickering in the EU , they will eventually do what it takes to avoid a Lehman because memories and fears of 2008 are still fresh. Merkel specifically talked about avoiding a Lehman event.
Do you notice how quickly fear and misery returns to the market? The financial media it seems, is doing whatever it takes to keep you out of the market. They certainty did their part in scaring the shit out of people during the crash trotting out the permabears like Schiff day in and day out with their end of the world forecasts. And did the media help you get bullish during this bull market? Not a chance....they did the opposite. I don't think there's some sort of bear conspiracy in the media...they are just trying to feed off what what people are feeling and since most people are still dour they prefer to talk about all the negatives out there. In the past several months I read so many times in the National post about how Canadians are supposedly dangerously deep in debt and how housing prices are out of control.
Look, I'm just like you. Despite all I've said I too am worried about the things that are happening out there deep down. How can't you after witnessing the financial system suffer a massive heart attack 3 years ago. But that's my emotions talking. My analysis of conditions along with history suggests that this bull market ain't done. This corrective phase we are going through is going to do whatever it takes to shake out weak holders while making longer term bulls sweat bullets. Just like last year, I'm already seeing technical types get shaken out of longs because of such and such trend line or moving average being violated. Last summer I talked about how I read about some technical type guy saying that if the market dropped below some level (I think it was 1050) the bull market from March 2009 would be officially over which did end up happening.. And remember the "death cross" that happen right at the exact bottom of the correction in July last year? Expect to see these sort of things happen again to yet again cause the market to make fools out of the most amount of men as possible. How long could this consolidation phase that I've been calling for all year last? Quite some time...perhaps as long as October or November! Look back to 2004 to see an example as to what we could see play out.
As far as ST action goes. The bulls need a catalyst to get some traction here. Although the VIX has gotten some religion admittedly it's still low here at 22 which suggests there's still decent risk of final downside puke to 1250 or so. Aside from the VIX everything else is in position for some sort of a bottom here. I still haven't put my cash reserve back to work yet but I'm close to doing so and I'm making a list of potential buys. Very fortunately for me, my core longs have held up quite well overall during this correction. I realize however, that this could change very quickly and so I'm getting mentally prepared for this. Don't get too fixated on the ST. If you see some long opportunities and your holding period is longer than 30 minutes go for it with at least a partial position.
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