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Has The Stock Market Reached Peak Optimism?

Stock-Markets / Stock Markets 2013 Oct 22, 2013 - 04:18 PM GMT

By: Profit_Confidential

Stock-Markets

Michael Lombardi writes: Optimism towards key stock indices is increasing each day. The U.S. stock market “seems” to be a safe place, and it’s common to hear stock advisors suggesting we are going higher on key stock indices.

Key stock indices like the S&P 500 are making fresh highs. Google Inc. (NASDAQ/GOOG) has surged above the $1,000-per-share mark. Just take a look at the chart below.


Recently, we heard the “Godfather of Charts,” Ralph Acampora, turn bullish on the key stock indices as well. Not too long ago, he held a very bearish view on them. In August, his stance was that key stock indices like the Dow Jones Industrial Average would decline 20% to 12,000. (Source: Wall Street Journal, October 17, 2013.)

Hold on a second! This all looks too familiar!


Chart courtesy of www.StockCharts.com

Whatever happened to what Sir John Templeton said about the bull run stock markets? If I remember correctly, it went something like this: “They are born when investors are most pessimistic, rise when they are skeptical, mature once optimism builds up, and come crashing down once there’s euphoria.”

It’s almost as if investors have forgotten everything that we saw with the stock market in 2007 and 2008—how it went crashing down after optimism surged.

And remember 1999? Investors were so bullish on the key stock indices that they were investing in companies that did not have any revenues or weren’t going to make money in the long run. After that euphoria, we saw it all come crashing down. Investors forgot one basic principle: when stocks keep reaching new highs; fundamentals really matter when it comes to the stock market.

Have we reached peak optimism on the key stock indices on the current rally?

One of the major factors behind the bear market rally we have seen since 2009 was easy money. It’s still around. I can potentially see key stock indices going a little higher, as the punch bowl is still on the table and I hear the new Fed chairman wants to keep the easy money policies in place as well.

In the short term, key stock indices are showing robust price rises, and that’s what the bear dressed as a bull does best. Unfortunately, take away easy money, and there is not much for stocks to celebrate. That’s why I don’t buy into this stock market rally.

This article Has The Stock Market Reached Peak Optimism? was originally published at Profit Confidential

Michael Lombardi, MBA for Profit Confidential

http://www.profitconfidential.com

We publish Profit Confidential daily for our Lombardi Financial customers because we believe many of those reporting today’s financial news simply don’t know what they are telling you! Reporters are trained to tell you the news—not what it can mean for you! What you read in the popular news services, be it the daily newspapers, on the internet or TV, is the news from a “reporter’s opinion.” And there’s the big difference.

With Profit Confidential you are receiving the news with the opinions, commentaries and interpretations of seasoned financial analysts and economists. We analyze the actions of the stock market, precious metals, interest rates, real estate and other investments so we can tell you what we believe today’s financial news will mean for you tomorrow!

© 2013 Copyright Profit Confidential - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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