7-17-2014 after the close comments

Jerry said it all, the market got pasted today.
I am in the middle of evaluating the new Volume Trigger Alert system which is frustrating because this is a buy system and the market is selling off. Still URI and AET issued volume trigger alerts today. With the general market selling off I decided to not act but just keep my powder dry.

In a way I hope we get a real market correction. We have gone 33 months since the last 10%+ correction. This has happened 5 times in history: 2005-2007, 1984-1987, 1934-1937 and 1926-1929. Each of these prior cases led to 35%+ corrections. I think we could use it.

Using the Warren Buffet measure of market frothiness: Total market capitalization as a percent of GDP has reached 127%. This is nosebleed territory. The 2000 dot com bubble peak was 150%, the 2007 real-estate bubble peak was 111%.

I am not fooled that the Federal Reserve is probably trapped into providing liquidity and low interest rates until the system implodes. I have read that all central banks have been buying equities. They have found themselves in the same pot of a no-yield environment that the rest of us are in. They have had to step out into more risky investments. [URL="http://www.advisorperspectives.com/dshort/guest/Cris-Sheridan-140627-Central-Banks-Buy-Stocks.php"]http://www.advisorperspectives.com/dshort/guest/Cris-Sheridan-140627-Central-Banks-Buy-Stocks.php[/URL]
One estimate of the amount of stock held by all central banks is 50% of all shares. If this is even remotely the situation the world is in trouble. If we have a bear market what in the heck would a central bank that has gorged themselves with equities do? Unwinding of positions could be massive.

Fantastic post Mike which mirror's my thinking precisely.

Thank you

Trev

[QUOTE=mscott;28352]Jerry said it all, the market got pasted today.
I am in the middle of evaluating the new Volume Trigger Alert system which is frustrating because this is a buy system and the market is selling off. Still URI and AET issued volume trigger alerts today. With the general market selling off I decided to not act but just keep my powder dry.

In a way I hope we get a real market correction. We have gone 33 months since the last 10%+ correction. This has happened 5 times in history: 2005-2007, 1984-1987, 1934-1937 and 1926-1929. Each of these prior cases led to 35%+ corrections. I think we could use it.

Using the Warren Buffet measure of market frothiness: Total market capitalization as a percent of GDP has reached 127%. This is nosebleed territory. The 2000 dot com bubble peak was 150%, the 2007 real-estate bubble peak was 111%.

I am not fooled that the Federal Reserve is probably trapped into providing liquidity and low interest rates until the system implodes. I have read that all central banks have been buying equities. They have found themselves in the same pot of a no-yield environment that the rest of us are in. They have had to step out into more risky investments. [URL="http://www.advisorperspectives.com/dshort/guest/Cris-Sheridan-140627-Central-Banks-Buy-Stocks.php"]http://www.advisorperspectives.com/dshort/guest/Cris-Sheridan-140627-Central-Banks-Buy-Stocks.php[/URL]
One estimate of the amount of stock held by all central banks is 50% of all shares. If this is even remotely the situation the world is in trouble. If we have a bear market what in the heck would a central bank that has gorged themselves with equities do? Unwinding of positions could be massive.[/QUOTE]

[QUOTE=mscott;28352]Jerry said it all, the market got pasted today.
I am in the middle of evaluating the new Volume Trigger Alert system which is frustrating because this is a buy system and the market is selling off. Still URI and AET issued volume trigger alerts today. With the general market selling off I decided to not act but just keep my powder dry.

In a way I hope we get a real market correction. We have gone 33 months since the last 10%+ correction. This has happened 5 times in history: 2005-2007, 1984-1987, 1934-1937 and 1926-1929. Each of these prior cases led to 35%+ corrections. I think we could use it.

Using the Warren Buffet measure of market frothiness: Total market capitalization as a percent of GDP has reached 127%. This is nosebleed territory. The 2000 dot com bubble peak was 150%, the 2007 real-estate bubble peak was 111%.

I am not fooled that the Federal Reserve is probably trapped into providing liquidity and low interest rates until the system implodes. I have read that all central banks have been buying equities. They have found themselves in the same pot of a no-yield environment that the rest of us are in. They have had to step out into more risky investments. [URL="http://www.advisorperspectives.com/dshort/guest/Cris-Sheridan-140627-Central-Banks-Buy-Stocks.php"]http://www.advisorperspectives.com/dshort/guest/Cris-Sheridan-140627-Central-Banks-Buy-Stocks.php[/URL]
One estimate of the amount of stock held by all central banks is 50% of all shares. If this is even remotely the situation the world is in trouble. If we have a bear market what in the heck would a central bank that has gorged themselves with equities do? Unwinding of positions could be massive.[/QUOTE]


As far as a central bank buy equities whose moves are dependent on the fiat currency that the bank controls, then there is no need to unwind the long positions. As a central banker, you only need to print more, weaken the currency, offer a competitive advantage to the companies that you own and wait it out.

When everybody does it, markets go up.

On the other hand, The Fed is officially not buying anymore. So, we only need the big buyers to drop out of the race to see equities go down on their own weight.



Pascal

Hi-

Now I understand Yellen and her staff's comments on biotech and social media being over-valued.. They are talking their book just like Goldman and others do on CNBC.

Agree that we need a material correction to set the table for a solid rally - eliminating QE could be the fundamentals behind that correction.

Shawn

An interesting read about the difference between bubbles and manias: while few would disagree we are in a bubble, according to Dr. Steenbarger the "maniac" element is still missing.

While a correction could come any time, and dangerous signals are all over the place, he is not the only one believing that this market has still room to go before the bubble bursts.

[url]http://traderfeed.blogspot.com.es/2014/07/when-bubbles-become-manias-psychology.html?m=1[/url]