SPX Hits 2 Month High
By Barry Ritholtz - January 2nd, 2009, 3:00PM
U.S. equities started the year in the green, rising 3% to hit a two-month high on the first day of trading.
Volume was thin, as many people took a 4 day weekend with New Years Day falling on a Thursday (rookies are manning the terminals!).
Still, following the market’s worst annual drop in 8 decades, its better than a sharp stick in the eye.
One last thing: Don’t buy the hype! Comments like “Stocks are attractively priced” or “Its a new year” are frighteningly ignorant.
The more likely reason is that there is a) no more tax selling, 2) funds have cash to put to work in the new quarter; iii) lite volume means shars can get pushed around. YMMV.
via Google Finance
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January 2nd, 2009 at 3:06 pm
Agree with your caveats Barry, P/Es are frighteningly high for a bear market.
In the short-term, we have pierced the trading range intra-day, let’s see if we close above 925.
If we zoom up towards 1000 from here would that be the Wyckoff Spring?? :-)
A big correction is on the way, the question is when? It might be a while…
All comments on CNBC are frighteningly ignorant.
January 2nd, 2009 at 3:19 pm
the bigger the sucker’s rally.. the more significant the pain. I’m kind of surprised by the willingness of so many ‘pundits’ to ignore what’s going on in the economy.. its getting worse.. not better – and as leftback says above.. the p/e’s are laughable – this is not a bottom (imho)
January 2nd, 2009 at 3:25 pm
Seems to me the consensus by the pundits for ’09 is very bullish based on what I’ve seen recently. It also seems to me that many are a tad too sure about it too. They’ll be making more excuses by late Jan/mid-Feb.
January 2nd, 2009 at 3:28 pm
There will be more bottoms.
Now this is a bottom:
http://www.jaunted.com/…/Gisele_Bundchen_StBarts.jpg
January 2nd, 2009 at 3:35 pm
Companies would be warning left and right today…but they are all on vacation…leave it till Monday.
January 2nd, 2009 at 3:43 pm
More like a sellers strike today. The Santa rally effect is well known and is actually working this year. Runs through the first 2 trading days of the new year.
January 2nd, 2009 at 3:43 pm
This is a classic Santa Claus, last 5 and first 2.
New funds still coming in, so Monday might see the market climb even higher before the correction.
Tuesday’s Factory order number might be the trigger, or Thursday’s claims.
Bruce, prepare the burger. Medium, with lettuce and tomato, hold the onions. Thanks.
January 2nd, 2009 at 3:45 pm
Leftback, 404 on Gisele. Too bad, I was looking forward to it.
Best regards,
RF
January 2nd, 2009 at 3:47 pm
3% up on a day that shows demand for manufactured goods have returned to 1948 levels? From Bloomberg:
“The decline in U.S. manufacturing deepened in December as demand for such products as cars, appliances and furniture reached the lowest level since at least 1948, signaling further cutbacks in factory jobs and production this year.
The Institute for Supply Management’s factory index fell to 32.4, below economists’ forecasts and the lowest level since 1980, from 36.2 the prior month. Readings less than 50 signal contraction. The group’s new-orders measure reached the lowest level on record and prices slid the most since 1949.”
Damn, it looks like this rally has legs…
January 2nd, 2009 at 3:48 pm
27 straight trading days QQQQ volume at or below 100 day MA for volume, coinciding with the dead cat bounce.
January 2nd, 2009 at 3:49 pm
RF, will try for embeddable video next time. Sorry.
As Yves would say: Quelle Surprise, another Ponzi.. wonder who this is, you can’t make this stuff up.
Dummies are everywhere.
BOSTON (MarketWatch) — The Securities and Exchange Commission is probing other potential Ponzi schemes as it works to discover what happened in Bernard Madoff’s alleged $50 billion fraud, Bloomberg reported Friday. Regulators are pursuing at least one case in which investors could have lost as much as $1 billion to an unnamed manager, according to the report
January 2nd, 2009 at 3:51 pm
Leftback: http://www.jaunted.com/files/3/Gisele_Bundchen_StBarts.jpg
January 2nd, 2009 at 3:55 pm
What’s the Over/Under on more revealed Ponzi Schemes in ’09? I place it at 2.5. Am taking the “Over”.
January 2nd, 2009 at 3:57 pm
Re: The previous post on retail / CRE,
SRS appears to be the correct contrary indicator today.
As CRE goes, so goes the economy. How can it be otherwise?
January 2nd, 2009 at 3:57 pm
I think you’ll get 10 ponzi schemes, which combined will equal a Madoff.
January 2nd, 2009 at 4:00 pm
One more up day Monday. See you then.
Bruce, chop-chop… leftback is hungry… another burger bet is complete.
January 2nd, 2009 at 4:02 pm
@lb: I hope you’re right. Been riding ACI, COP, VLO and MOS as my “longs” pretty nicely the last couple of weeks. Getting close to dumping and going all-in short. Am going to wait for that last leg up over the next couple of weeks.
January 2nd, 2009 at 4:03 pm
looks like someone dumped 1M shares QQQQ before the close
January 2nd, 2009 at 4:04 pm
Picked up a small amount of FAZ at the close.
January 2nd, 2009 at 4:19 pm
Off subject but: How do you know when you are dealing with a mathematician? When you ask him to pick a number between 1 and 10 and he says, “N”.
January 2nd, 2009 at 4:29 pm
I exited my longs far too early today. It’ll be interesting to see what happens at 948…and it doesn’t look like I’ll be waiting much longer than Monday.
January 2nd, 2009 at 4:38 pm
@ mcrcr4
Try this for the bottom in St. Barts
http://tinyurl.com/9e7eco
January 2nd, 2009 at 4:52 pm
@batmando: There has to be a “going long” joke in here somewhere… :)
January 2nd, 2009 at 4:56 pm
@DP
Tom prolly knows something about going long, but knows better than to say anything, just grins that innocent All-American boy grin
January 2nd, 2009 at 6:27 pm
Howdy Folks! Happy New Year.
@ leftback – 1) P/Es today versus longer-term historical P/Es are skewed because of the growing presence of new economy, ie technology, for example, which trades at a higher multiple and makes up an ever increasing part of the S&P. 2) it could be argued that P/Es should be higher now, because Uncle Sam is mitigating market risk, so cost of capital calculation would come down.
@ KJ – I’ve been surprised at the limited level of chatter about the impending implosion of the commercial real estate market and the blow it’s going to have on banks and highly leveraged semi-institutional investors.
January 2nd, 2009 at 6:38 pm
I doubt that the final market bottom would be associated with the steepest rise in bullishness in 5 years. More likely it would be marked by a long term washout in sentiment. Any thoughts?
http://www.investorsintelligence.com/x/free_chart.html?r=101#
January 2nd, 2009 at 6:48 pm
Made money today; felt good. Sold out of PWE for %10 gain with 2% Jan divi still comming. Also made quick couple grand on SSO. Didn’t want to hold them over the weekend. Anyone get in on DXO?
January 2nd, 2009 at 7:20 pm
the casino is not only ignoring bad news it is ignoring ATROCIOUS news. obviously it is in rally mode and may conceivably trade to 1000 s+p or higher (based on nothing but hope on the president elect stimulus) once the la la land obama absolute fantasy wears off the markets will get lambasted. the economy will not recover in 2009 (recovery in my opinion is pure lunacy) . obama and the fed will continue to worsen the situation and depression will once again come inot play. the braindead need to wake up since we are following the japanese playbook page for page. i would not be surprised to see the s+p in the 5 handle at some point this year. my year end target is 720. i can’t rule out japanese style lows in the coming years which would equate to s+p 325 dow 2400.
January 2nd, 2009 at 7:32 pm
Just looked at S&P’s latest ’09 earnings estimates. $42.24, implying that we’re trading 22x forward. Leftback is right – that’s nutty. And when things are nutty, it’s a good time to take a position. There’s a very good short opportunity coming up. I had been very confused during December, unable to take many positions with any conviction, but I see one formulating…
January 2nd, 2009 at 8:16 pm
TrickStar,
1) Why should technology trade at a higher multiple? Just because “it does” doesn’t mean it should.. and it really didn’t until the late 90′s.. INTC was the ultimate cyclical 6-10x multiple stock for a long time.
January 2nd, 2009 at 9:23 pm
@SB
I doubt that the final market bottom would be associated with the steepest rise in bullishness in 5 years. More likely it would be marked by a long term washout in sentiment. Any thoughts?
http://www.investorsintelligence.com/x/free_chart.html?r=101#
I don’t think comparing the current steep rise in the NYSE Bullish percentage to the last 5 years is applicable. I would compare it to a time when there was a similar huge plunge in stock prices (like the dot com bust, 9-11-2001 or even 1929). Or maybe when there was another very long recession (1980?).
January 2nd, 2009 at 9:40 pm
Lat year this time is was the “Goldilocks” market- not too warm, not too cold, and everyone was happy until the Papa Bear came home and ate them alive. Now it’s the “Tinkerbell” market, where it’s dead, but everyone thinks that if they all clap together as hard as they can they can bring it back to life.
January 2nd, 2009 at 9:43 pm
@duncanst:
Don’t have that data…what I do know it that 2009 is starting with
1) II Bulls more bullish than anytime in 2008
2) 10 and 21 day Total Equity Put/Call more bullish than anytime in 2008
3) Short Interest in Nasdaq laughable
4) VIX at mid January 2008 levels
5) US dollar index 9% above 4Q08 (will hurt foreign revenue)
6) Home prices down 15% or more over 2008
7) Unemployment and economy worsening
The only positive I can find is oil down, but isn’t that indicative of the weaker economy? Low LT interest rates are actually negative…they can only rise from here or stay flat at best.
January 2nd, 2009 at 9:46 pm
@rtol:
So true…CNBC was nauseating today…Sue Hererra yelling “YES!!!” at market gain…other hosts, probably Kneale, saying the market was rising because “people were sick of being negative and losing money.”
Then there was Suze Orman saying Cramer has NOT been wrong.
January 2nd, 2009 at 9:51 pm
I know I will be watching closely over the next 2-3 weeks for signs of distribution – I do not think the deleveraging process is close to being through. The CRE explosion will not be felt as severely in the markets I wouldn’t think – my understanding is the at risk banks are mostly the smaller regional and local banks who were frozen out of the home mortgage business so it will be the total number of failures that grabs the headlines eventually and not simply one big implosion.
January 2nd, 2009 at 10:47 pm
Not to harp on the II Bulls..it is only one data point…but it is best to compare it to the last 5 years, as the market has changed a lot in the last 10 years. The major increases in bullishness can be counted on one hand:
1) 2004: 20% rise in 5 months
2) 2006: 30% in 8 months
3) 2007: 28% in 3 months
4) 2008: 30% in 5 months
and finally
5) In progress: 45% and counting in 3 months
The current move seems unhealthy for a market trying to bottom. This and the other indicators likely show that the Fed is once again fostering moral hazard.
January 2nd, 2009 at 11:08 pm
I’d like to think that the federal government removing the uncertainty of an auto bankruptcy had a lot to do with today and this past week – this is the mini-rally that they wanted to have in early December but couldn’t because of possible bankruptcy uncertainty. It seems as if this particular moment is sort of the lull in the storm – the eye of the hurricane, maybe. Bad news is priced in – and, for the moment, at least on the economic/financial front, it seems like the first time since Lehman Bros that there isn’t some dreadful potential disaster looming.
January 2nd, 2009 at 11:21 pm
S.B. @ 9:43
Just to play devil’s advocate (I added to my short position today):
The 21 day MA of the equity p/c ratio (excluding index options) was lower in May than now;
The 5- and 10-day MA of the VIX is higher now than at any time during the period from January 2008 until September.
January 2nd, 2009 at 11:44 pm
@DL:
About the put/call excluding options…ok the 21 day was a bit lower in May…but when it was this level in August, the market was shredded for the next two months.
As for VIX, I never used such a low time period MA on it…it is not like put/call, where it can move from the top to the bottom of its range in a day. I would interpret VIX at this point to be trying to find a new range…if you put a gun to my head, I would say it will range from 35 to 65 for awhile.
January 2nd, 2009 at 11:55 pm
No guns.
January 3rd, 2009 at 2:52 am
FWIW, Richard Russell has just turned bullish. A brief excerpt:
“OK, so what about the stock market? I’ve been saying that the market has been building a structure that looks very much like an extended base.
And oh yes, I forgot to mention this — the conventional wisdom is that — if the market rallies from here, the rally would be a fake-out much like the famous post-crash phoney-rally of 1929-30. This widely-held viewpoint has also gone a long way toward keeping buyers out of this market.
It occurs to me that this is a good time to remember my old friend Marty Zweig’s classic warnings — “Don’t fight the tape, don’t fight the Fed.” Well, if you are bearish on 2009, you are indeed fighting the Fed and probably the tape. Why do I say that? Because the Bernanke Fed is going all out in its effort to turn the US economy around. Bernanke says the Fed will do whatever it takes to halt the current trend to deflation and to bring back prosperity and mild inflation to the US. The stock market seems to have finally climbed aboard the Fed’s bullish bandwagon. ”
We shall see, but I suspect this market might just fake out many including former longs who cashed out and are probably too scared to get back in (and then finally get back in around S&P 1100ish), AND the 2008 bears who made alot and might just end up giving alot back by overstaying the bearish position.
January 3rd, 2009 at 3:06 am
Is sentiment bullish amongst the average Joe Retail investor?
http://runningofthebulls.typepad.com/toros_running_of_the_bull/2009/01/cash-levels-at-18year-highs-.html
“The $8.85 trillion held in cash, bank deposits and money- market funds is equal to 74 percent of the market value of U.S. companies, the highest ratio since 1990, according to Federal Reserve data compiled by Leuthold Group and Bloomberg. …
The eight previous times that cash peaked compared with the market’s capitalization the S&P 500 rose an average 24 percent in six months, data compiled by Bloomberg show. …”
Maybe it is different this time? :)
January 3rd, 2009 at 7:10 am
fighting the fed has been the most profitable trade EVER in 08. fighting the tape has been the most profitbale trade EVER for bears in 08. the fed has no shot at eliminating deflation them thinking they can keep the economy on life support is preposterous. deflationary grip on the economy is firm. we shall follow the japanese playbook page by page.
January 3rd, 2009 at 8:04 am
Cash levels are high? Ok, but for every buyer there is a seller…also average Joe Retail has record levels of debt, could lose his job and his house value still has, on average, 40% to fall.
January 3rd, 2009 at 12:12 pm
Joe Retail, on average, took a big hit last year and will not be quick to buy back in. He’ll wait to see if the (sucker’s) rally has legs, then jump back in mostly likely near the top and get creamed again.
January 3rd, 2009 at 3:04 pm
Mike C @ 3:05 am
I agree with “Mind” @ 12:12.
Also, that 24% rally could begin in March, from the 750 level (SPX)
January 3rd, 2009 at 7:19 pm
From the Department Of Relevant Quotations:
“Markets can remain irrational longer than you can remain solvent” — John Maynard Keynes
January 3rd, 2009 at 7:33 pm
Ginormous market moves can take longer t0 play out than traders with finite lifetimes can anticipate.
For the markets to reach parity with the economic conditions in 2009 would require a drop so steep and so far that tried-and-lacking strategies like banning short selling (a la the Pakistani exchange) and closing the exchanges for weeks at a time might appear attractive.
I’m certain that Dubya’s crew would go that route. It remains to be seen what Obama’s crew will attempt.
January 4th, 2009 at 3:26 am
I’m showing a Dow Theory Buy Signal on Friday – anybody else get that?