Monday March 26, 2012
Late News
Zero Hedge reports that SPX futures volume was 20% below average, on a big up day like today, that is a negative divergence.
Our post March 15 detailed how the NASD zoomed from 3000 to 5000 in a mere four months, and a few months later was right back where it started. Now let's put that in as we say here Perspective for you.
A Market Perspective on Blow Off Tops
The NASD believe it or not was trading a 165 or so in 1981. Just to use round numbers let's move to 1982 and say 200. Okay that makes the total move 5000-200 = 4800 points. It took 17.66 years to rack up 2800
of those points or 58% of the move took 98% of the time. Now see where I am going?
Therefore the reamining 42% of the move took, 2% of the time. So in the last 2% of the time 42% of the gains were made! That market students is a social mood extreme!
Now, we had another top in 2007 when the NASD topped at, surprise 2800, near that old 3000 mark. In the next year it collapsed to 1300 losing over half its value.
Now we are at another apparent top and it is, well, 3000. If we follow the previous patterns of 18 cycles of stagnation, we should be near a high now. That fits as investors have moved the NASD from 2300 last October to 3100 or 800 / 2300 which is 35% in a mere six months!
Where's Spuds McKenzie, Party Animal, when we need him?
Our point here is that investors particularly those late to the party, pile in heavily at the very last minute. There is always a rationalization be it the dot.coms in 2000 or Apple now. So let's compare 2008 and 2012, are there similarities
Presidential Election Year - check
Popular apocalytic movie depicting a wold with no hope - check (Dark Knight and Hunger Games)
Run up in the high beta index the NASD - check
Massive potential for loan defaults -then mortgages now in American student loans, European debt, and massive world wide speculation on real estate - check
Potential for global outbreak of war or ongoing wars declared and undeclared - check
FED meddling in markets - Check
Congress passing insane legislation - Check ( no wait that's normal...)
Insiders are not buying at the top - check
Hot stocks fuel the move up unsupported by broader indexes - check (have you bought your $50 LULU Yoga Tank Top, ladies, do your part for the economy)
Today was almost a 90% up day. It is the last week of the quarter, window dressing by the funds, will this frantic pace last the week? Not sure but I am sure it looks a lot like 2000 and 2008.
thanks for reading TMP.
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