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01/09/10 Bullish Fundamental Arguments for US Stocks.

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  • 01/09/10 Bullish Fundamental Arguments for US Stocks.

    To my reckoning there are NO fundamentally bullish arguments. Anybody knowing one/some, then link it/them.

    Anything having to do with bullishness in the equity markets seems to be mostly technical arguments, of which it seems to me there are a good number.

    Below is from The Chartist (I don't take Sullivan as anymore prescient than anyone else) and from his Newsletter of 1/7/2010 he is up 44.81% since coming late to the party on 7/21/09.

    "Despite the fact that stock market newsletter writers are highly bullish, with the latest from Investors Intelligence showing 48.3% in the bullish camp versus 16.9% bears, the public has yet to embrace this bull market and that is one of the best things that it has going for it. Between July 31st and November 30th, investors pulled $36 billion out of domestic equity funds and pumped $142 billion into taxable bond funds. Since November 30th through the end of the year, they pulled another $10 billion out of domestic equity funds while putting $35 billion into bonds. A total of $46 billion has been pulled out of domestic equity funds between August 1st and December 29th.

    "Obviously the public is not onboard. Investors who
    are on the sidelines view the rally with a great deal of suspicion, wondering when the next shoe will drop with the bear market reasserting itself; however, they will come back as they always have as the economy continues to improve. One strong inducement is the fact that the yield from money market funds is at
    historically low levels, so much so that the majority of money market funds have been waiving their fees. If their regular fees were in place, money market funds would be generating a negative return. This bodes well for the market, and if the past is any criteria, we would expect a series of monthly inflows into the coffers of mutual funds prior to the end of the bull market. Having said that, we should point out that in the stock market as well as in life there are no guarantees. The best we can do is to try to have the odds in our favor, which we feel they are at the present time. "As we go to press, all of the key indices are above their 10, 50, and 200-day moving averages and all are at or slightly below their respective bull market highs. The Advance/Decline Line reflecting common stocks only has also made a recovery high which is another plus for the market, because the A/D Line often tops out ahead of the major averages (see chart above). As an example, the A/D Line reached its high of the previous cycle in early June 2007, four months ahead of the S&P 500 which topped out in early October. In the bull market of the 90’s it topped out in April of 1998, almost 2-1/2 years ahead of the S&P 500 which reached its high of the cycle in March of 2000. The high-low differential, which is a ten-day moving average of new highs versus new lows on the NYSE, is also positive and has been in a pronounced uptrend over the past three weeks and is very close to its peak levels of the cycle. Similar to the A/D Line, it is confirming the market’s upward trend.

    JN here. That is his impression, and the part regarding lack of divergences in A/D-line, so far, I think supports the potential for more upward movement in here, and the small caps and and banks at least for the kickoff of 2010 have regained leadership. I think Donald Coxe has made the point more that once that such leadership is significant. I'm no Dow theorist, but both the DJI and TRAN closed at new recovery highs on Friday too.

    Below is from today's Mike Burke Report.





    Lat week, the best performing major index did 3.07%, that was the RUT, and the $KRX (regional bank index) up 5.5%, $MID up 3.5%, and the $XVG (VGY) did 3.57%. And the $BKX was up 4.29%.

    Below is a sentiment indicator from Barron's, which as well as I could tell for some period of time in the past showed incorrect data, but recently, the data in the graph seem to me reasonable, whereas before it was truly screwy.



    I have never read how Citigroup derives the data for this indicator, perhaps it is like Finster's FDI--proprietary information. Normal asessment of the Citigroup data would suggest that fewer people currently have any bullish orientation (and that could be a sign of good sense), but on a contrary basis, such lack of "everyone being bullish" can be construed as actually bullish.

    I wanted to upload an .xls file that shows some of the sentiment indicators, and breadth data going back to near the beginning of 2006, but the tulip won't allow such an upload. Assuming my data are correct, it gives some insight to show how various data top out before the indices might.

    Anyone seriously interested can PM me and give me an email address and I'll send you back the file--at no cost to the first 10 that request it. After that the cost is 1M$. If more than 10 were to request it, I'll come back and make a suggestion. "Seriously interested" I don't think would include metalman, FRED, EJ, or c1ue--not picking on those guys, but those stick in memory as eschewing anything technical.

    My conclusion:

    I'm thinking this year reminds me of how I think I might have felt in 1987 (though I don't have such a good memory), which was nobody was predicting that market would continue to go up. Such a scenario of the markets continuing up for a while would fit into the historical performance analysis of the presidential cycle put forth by Burke, and it would give time during a continuing up-move for more supposedly small investors to capitulate in their bearishness if that is what actually exists at the moment with small investors.

    I'm personally giving the long-side of equities the benefit of the doubt for the next 6-8 months. Having written that means that a crash may be around the corner.
    Attached Files
    Last edited by Jim Nickerson; 01-09-10, 04:38 PM.
    Jim 69 y/o

    "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

    Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

    Good judgement comes from experience; experience comes from bad judgement. Unknown.

  • #2
    Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

    Dan Sullivan's quote in the first post references a "chart above."

    Below is the chart he referenced, which I don't find particularly enlightening. It may be because of my subscription level at stockcharts.com because I cannot make such a chart as below for five years. I think it would probably be more instructive to see the divergence between the A-D line and the SPX coming up upon the October 2007 top. Anybody out there capable of deriving and posting such a chart say going back five years?

    Attached Files
    Jim 69 y/o

    "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

    Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

    Good judgement comes from experience; experience comes from bad judgement. Unknown.

    Comment


    • #3
      Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

      Well, that's been the story since about July. Stocks are going up, but a crash could come tomorrow.

      Comment


      • #4
        Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

        Here's the chart of $SPX vs. NYSE advances-declines shown cumulatively for the past 15 years. It's decline from first quarter 1998 was not an indication that the market was topping out; however, in retrospect that was a once in a lifetime market behavior regarding the blow off in equities into 2000.

        The markets may turn Monday, or six months from Monday, but a continuation of appreciation in equities, I think, seems quite possible until there is some divergence in the A-D line failing to make newer highs.

        Attached Files
        Jim 69 y/o

        "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

        Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

        Good judgement comes from experience; experience comes from bad judgement. Unknown.

        Comment


        • #5
          Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

          1/10/10 via http://www.investmentpostcards.com/


          Casting his eye on 2010, David Fuller (Fullermoney) said: “Stock market action continues to confirm a bull market in every respect. Downside risk is probably limited to periodic mean reversions towards the rising 200-day moving averages.


          “The main danger signs to look for will be an eventual, persistent tightening of monetary policy and an inverted yield curve. When this next happens, and both tend to be lead indicators, I will focus on introducing trailing stops for all equity positions, actual or mental, and ideally use strength to reduce equity exposure. Currently, I maintain that we are still in the second psychological perception stage of the bull market, characterized by the ‘wall of worry’. With any luck, we can look forward to the third and climactic stage of a bull market cycle, in which investors become euphoric.

          “The time to start thinking about closing long portfolios in anticipation of the next bear market, I suggest, will be when the yield curve (US 10-year yields over 2-year yields) next inverts by moving below zero. However, the lead was so early last time (early 2006) that some of us became complacent about it.”
          Jim 69 y/o

          "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

          Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

          Good judgement comes from experience; experience comes from bad judgement. Unknown.

          Comment


          • #6
            Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

            “The time to start thinking about closing long portfolios in anticipation of the next bear market, I suggest, will be when the yield curve (US 10-year yields over 2-year yields) next inverts by moving below zero. However, the lead was so early last time (early 2006) that some of us became complacent about it.
            Studying yield curves to predict the market is like studying the difference in fuel pressure between the pressure near the tank versus that near the injectors or carburetor. A low interest rate corresponds to ample (high pressure) fuel. When there is a negative yield curve, this corresponds to what happens just after someone has backed off on the throttle, reducing fuel pressure into the engine (though ample pressure remains in the fuel line back near the tank.) When this happens, one can expect the vehicle to slow down shortly thereafter.

            All this analysis works until someone blows a head gasket or floods an engine.
            Most folks are good; a few aren't.

            Comment


            • #7
              Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

              Originally posted by ThePythonicCow View Post
              Studying yield curves to predict the market is like studying the difference in fuel pressure between the pressure near the tank versus that near the injectors or carburetor. A low interest rate corresponds to ample (high pressure) fuel. When there is a negative yield curve, this corresponds to what happens just after someone has backed off on the throttle, reducing fuel pressure into the engine (though ample pressure remains in the fuel line back near the tank.) When this happens, one can expect the vehicle to slow down shortly thereafter.

              All this analysis works until someone blows a head gasket or floods an engine.
              yep... with plenty of warning...

              Comment


              • #8
                Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

                Originally posted by the prescient Jim Nickerson View Post

                My conclusion:

                I'm thinking this year reminds me of how I think I might have felt in 1987 (though I don't have such a good memory), which was nobody was predicting that market would continue to go up. Such a scenario of the markets continuing up for a while would fit into the historical performance analysis of the presidential cycle put forth by Burke, and it would give time during a continuing up-move for more supposedly small investors to capitulate in their bearishness if that is what actually exists at the moment with small investors.

                I'm personally giving the long-side of equities the benefit of the doubt for the next 6-8 months. Having written that means that a crash may be around the corner.

                Confirmation bias. I ran across this this evening. 1/11/10 http://bespokeinvest.typepad.com/bespoke/

                Originally posted by Bespoke
                With today's advance, the S&P 500 is also now up six days in a row. The only other time the index started off the year with a winning streak of six or more days was back in 1987 when the first seven trading days of the year were all positive.
                Below is SPX for 1987.



                Before we get to the crash later this year, we need to get through the rest of January first. How might the market behave in here? No feaking telling.

                What needs to happen it that the market continues moving up until it sucks in all the small investors who become convinced that this mother will never stop going up. Consider how badly one feels now who hasn't been in the market since early after the March 09 lows and continues to be convinced the market is destined to start down tomorrow, but then this mother continues up until the late summer. Better jump on the train.
                Attached Files
                Jim 69 y/o

                "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

                Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

                Good judgement comes from experience; experience comes from bad judgement. Unknown.

                Comment


                • #9
                  Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

                  1/11/10 via http://www.nakedcapitalism.com/2010/....html#comments

                  Originally posted by George Washington
                  Joseph Stiglitz says that Wall Street is hyping up the economy to sell more stock.


                  Has it worked?


                  Well, the stock market certainly has rocketed up from its March lows.
                  But many investors are still avoiding equities.


                  As Vincent Deluard – a strategist for TrimTabs Investment Research (25% of the top 50 hedge funds in the world use TrimTabs’ research for market timing) – says:
                  We’ve never seen this before – such a huge rally, and the little guy is out.
                  In other words, the stock market rally is due almost entirely to hedgies, pension funds, banks and other institutional investors, and not every day investors.


                  It is even possible that the government itself has been propping up the stock market. And Bill Gross and Nouriel Roubini say that we have a Ponzi style economy.


                  TrimTabs notes that small investors pulled out $14 billion net from stock mutual funds from the beginning of last year through mid-December, on top of a net $245 billion withdrawn in 2008.


                  Individuals hold the lion’s share of stocks. For example, the Fed reports that individuals held 80% of the $19 trillion in stock in U.S. companies (both private and public) at the end of September. So the recovery will not happen so long as the little guys are sitting on the sidelines.


                  TrimTabs notes that most of $592 billion taken out of money market mutual funds last year has gone into bond and bond-hybrid funds instead.


                  No wonder David Rosenberg is saying:
                  • “People have been lured into two bubbles seven years apart, and for a lot of them it’s over.”

                  • “The bulls say if the market is up this much without retail investors, just watch when they come in, but it isn’t going to happen.”

                  Investors who have not been spooked or angered by the market are probably too poor to buy anyway.
                  In the middle of the above quote is a hyperlink "itself" that leads to a discussion regarding whether the Fed or the "plunge protection team" buying SPX futures has contributed considerably to the run up since the March 2009 lows.

                  Here is a link in which Charles Biederman discusses that issue: http://www.zerohedge.com/article/mor...-buying-stocks
                  Last edited by Jim Nickerson; 01-11-10, 11:24 PM.
                  Jim 69 y/o

                  "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

                  Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

                  Good judgement comes from experience; experience comes from bad judgement. Unknown.

                  Comment


                  • #10
                    Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

                    Originally posted by Jim Nickerson View Post
                    1/11/10 via http://www.nakedcapitalism.com/2010/....html#comments



                    In the middle of the above quote is a hyperlink "itself" that leads to a discussion regarding whether the Fed or the "plunge protection team" buying SPX futures has contributed considerably to the run up since the March 2009 lows.

                    Here is a link in which Charles Biederman discusses that issue: http://www.zerohedge.com/article/mor...-buying-stocks
                    This article http://contraryinvestor.com/mo.htm says, there is no continuation for the current "bigger fool" model, because retail investor (or even corporations) do not have enough cash to play the BF role.
                    медведь

                    Comment


                    • #11
                      Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

                      Originally posted by medved View Post
                      This article http://contraryinvestor.com/mo.htm says, there is no continuation for the current "bigger fool" model, because retail investor (or even corporations) do not have enough cash to play the BF role.
                      If as a number of observers have pointed out "investors" (for lack of a more specific category) have been taking money out of equities and putting it into bond etf's and mutual funds, then what happens if whatever has driven the equity markets up so far continues? It could be that money in bond funds could be redirected back into equities. I certainly cannot aver that that will happen, but it must be a possibility.
                      Jim 69 y/o

                      "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

                      Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

                      Good judgement comes from experience; experience comes from bad judgement. Unknown.

                      Comment


                      • #12
                        Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

                        Also the baby boomers, I would imagine they are pulling out of riskier assets as well.

                        Plus it seems most corporations are very unfriendly to stockholders these days. Many corporations seem like a private piggy bank for the executives at the expense of the shareholders.

                        Comment


                        • #13
                          Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

                          Originally posted by Crazyfingers View Post
                          Also the baby boomers, I would imagine they are pulling out of riskier assets as well.

                          Plus it seems most corporations are very unfriendly to stockholders these days. Many corporations seem like a private piggy bank for the executives at the expense of the shareholders.
                          There is no shortage of bearish arguments, and there hasn't been a shortage since the last quarter of 2008, and especially at the bottom of 03/09.

                          How many people right now are convinced enough that the run up in US equities (or anywhere for that matter) is over, about to be over, is done, is finished and have significant short positions to take advantage of the correction that this senseless bull market since March must undergo?
                          Last edited by Jim Nickerson; 01-12-10, 12:11 AM.
                          Jim 69 y/o

                          "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

                          Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

                          Good judgement comes from experience; experience comes from bad judgement. Unknown.

                          Comment


                          • #14
                            Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

                            Originally posted by Jim Nickerson View Post
                            There is no shortage of bearish arguments, and there hasn't been a shortage since the last quarter of 2008, and especially at the bottom of 03/09.

                            How many people right now are convinced enough that the run up in US equities (or anywhere for that matter) is over, about to be over, is done, is finished and have significant short positions to take advantage of the correction that this senseless bull market since March must undergo?


                            I'll bet not many people are willing to put their money where their mouth is these days - shorts or bulls.

                            I am in the market, but have been holding my finger on the trigger for a long long while, and am in much better spirits than I was in February 2009. Having said that, did I take any opportunity to put more money in play on the stock market?. Nope, the cash is sitting there. I'm already heavy into AAPL. I passed up LINE at about $14.00 back in April or something like that, passed on XOM too - just watched it climb up. We jokingly said we should by CitiGroup for $1.00 last year - do it for a joke we said. Instead I shorted China in fall. Lol!

                            Dow 20K here we come - is probably how it's going to turn out. It's just as likely as anything these days - all madness.

                            Bernanke inferred that he would not touch interest rates at least until fall 2010. I didn't hear about this March 2010 thing - I better read up. Even the threat of an interest rate climb is going to cause a big drop in the market, so I hope it's not true - I need another month to squeeze the greed juice out of my AAPL, which should break 230 perhaps around the 25th of Jan with earnings report and new product a few days later.

                            Comment


                            • #15
                              Re: 01/09/10 Bullish Fundamental Arguments for US Stocks.

                              http://www.marketwatch.com/story/new...ead-2010-01-20

                              1/20/10

                              Originally posted by Hulbert
                              ANNANDALE, Va. (MarketWatch) -- On Tuesday, when the stock market hit a new 52-week high, no fewer than 316 NYSE-listed issues also hit new yearly highs.

                              For all of last week, furthermore, more than 800 big board issues hit new 52-week highs.

                              These are impressive numbers, suggesting to at least some analysts that the final top of the current bull market is, at a minimum, several weeks or months into the future.

                              Consider first an analysis of the last 13 bull-market tops recently conducted by Ned Davis Research, the quantitative research firm. On average, the firm found, just 13.2% of NYSE-listed issues were hitting new weekly 52-week highs at those bull market peaks.

                              At the Oct. 2007 market top, for example, the percentage stood at 14.4%. At the bull market top in early 2000, furthermore, the comparable percentage stood at just 6.4%.

                              What about the current situation?

                              Last week, according to the firm, 25.1% of NYSE listed issues hit new 52-week highs. That's higher than the comparable percentages at any of the last 13 bull-market peaks, suggesting to Ned Davis that "the tape is bullish."

                              This historical comparison is just one data point, of course, but there is more good news imbedded in the new-high data: There typically is a long lag time between when the percentage of stocks hitting new weekly highs reaches its peak and when the bull market finally tops out.

                              In fact, according to Davis' calculations, the average lag at the last 13 bull-market tops was 33.6 weeks -- nearly eight months. And on none of those occasions did the bull market top out before the percentage of weekly new highs.

                              This adds up to good news, because the peak so far in the weekly percentage of stocks hitting new 52-week highs came the week before last. That's when the percentage rose to 26.7%. Even if that 26.7% marks the highest level to which this percentage rises during this bull market, these historical parallels would suggest that -- if the future is like the past -- the stock market itself might not peak until the end of this coming summer.
                              At the link another indicator based on new highs and lows that is used by the Appel's is discussed. It too is currently bullish.
                              Jim 69 y/o

                              "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

                              Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

                              Good judgement comes from experience; experience comes from bad judgement. Unknown.

                              Comment

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