Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Buying into the Stock Market Rally, Hook, Line, and Sinker

Stock-Markets / Stocks Bear Market Aug 25, 2009 - 07:18 PM GMT

By: Mike_Shedlock

Stock-Markets

Best Financial Markets Analysis ArticleBelief that the worst is behind is now nearly universal. Mickey Mouse, aka Ben Bernanke, even has himself fooled. He was reappointed today as grand wizard (see Bernanke's Self-Promotional Reappointment Campaign A Stunning Success) and in general people are feeling pretty good about it.


Indeed Consumer sentiment improves more than expected.

Consumer sentiment rose more than expected in August and expectations hit the highest level since the recession began, indications that Americans' pessimism about the economy may be lifting.

The New York-based Conference Board said Tuesday its Consumer Confidence index rose to 54.1 from an upwardly revised 47.4 in July. Economists surveyed by Thomson Reuters had expected a slight increase to 47.5.

Still, the index is well below 90, the minimum level associated with a healthy economy. Anything above 100 signals strong growth.

Sal Guatieri, an economist at BMO Capital Markets, said the jump in the expectations index meant consumers likely will spend more in the months ahead.

"It won't be a smooth ride, but with consumer confidence now tracking higher, the groundwork for a sustainable recovery appears to be in place," he wrote in a note to clients.

I beg to differ with Guatieri. Throwing money at problems, just as Japan did, is not grounds for a strong recovery.

Few seem to understand the secular change in consumer attitudes and what a secular bear market in stocks really looks like.

Bumpy Ride To Bottom

Inquiring minds are reading Markets In for a Bumpy Ride to a Bottom.

The current conviction running rampant is that kick-starting the animal spirits is the appropriate abracadabra because the full faith in the government and the belief that the market always came back has always worked -- eventually. The problem is, eventually is a long time.

The symbiotic relationship between government and Wall Street is being bought by the financial markets -- literally. It’s not just that financial markets believe in the government -- they want to believe, they have to believe. They have had little alternative since essentially both were part of the problem.

Main Street is not so sanguine. A new downturn and a failure of green shoots to magically manifest into redwoods could send a severe psychological shiver. Question: if crisis has been completely stemmed and we're on the road to recovery and the government has used all its bullets, a failure of the party line and a second dip should cause the power of the government to be questioned. Disillusionment could cause what might be a second dip in otherwise less virulent great recessions to become more pronounced. At best it could translate into a long period of bumping along the bottom. At best it could accelerate a downturn with a hope-filled V going from a W to a Y.

Few of the technical analysts on the Street today have ever traded through a secular bear market. Nor have many of their indicators. This is the first secular bear market where technical tools and indicators have been democratized to a large degree by the computer and the Internet. There's a lot of belief being placed in a lot of indicators that have not proven themselves in a secular bear market. In my experience, the thing with most technical indicators is that while they may have worked well many times, they can fail you when you need them the most -- Anthill Indicators. Moreover, most technical indicators are descriptive, not predictive. Cycles and the price patterns they trace out in their rhythmic motions speak to the mood of investors' emotions: the music of the market rises and falls, undulates and seethes with the mentality of the mob, the sentiment of the crowd.

Last week the Daily Sentiment Index hit a new high of 88% bulls. The last time this level was hit was in October 2007. Why was there so much bullishness then... the crisis was over? The belief in the Fed and containment was widely embraced. The Street bought it hook, line and sinker. Literally.

Once again, market participants have bought into wizardry, hook line and sinker as noted in Belief In Wizards Runs Deep.

Few think a W or L shaped recession is possible. The S&P PE is an insane 145. Yes, that is backward looking. But what forward earnings does everyone expect given consumer attitudes towards consumption have changed for good and boomers heading into retirement are scared to death?

Whatever those earnings expectations are, disappointments are likely. Either earnings will miss targets, or the stock market will sink anyway because the earnings and then some have long been priced in. However, that is tomorrow's business. Today's business is about buying into the rally hook line and sinker, just as the charlatan wizards have hoped.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in