Market View: Why Buy Here?
October 21, 2008 1:39 AM
Here is the fundamental problem with the market with the SP approaching 1000. Why buy? It is a simple, yet fundamental reason to be long the market. Let’s look at it this way. If the market was a strong sell at 1200 (it was) then why buy at 1000? What is the upside versus the risk? it isn’t there. Therefore, even if we clear Tuesday’s high, there simply is NO reason to buy this market unless it is a trade. Earnings are falling, not rising. The financial risk is still there regardless of the measures put in to stop banks from failing. Keep in mind that only the major banks have been backstopped by the government to not fail. Many mid to small banks in the SP will fail, at some point, IMO.
People have to understand that we are in a bear market. Therefore, EVERYTHING to the long side is a trade, NOT an investment. Let’s examine things like this. The 2002 low was lower than the lows put in. Is the economy better or worse than 2002? Far, far worse, it isn’t even close. Therefore, to make the case that the market should be higher than in 2002 long term is complete foolishness. This is a bear market rally off the low, nothing more, IMO.
One last point. This site has made the case, repeatedly, that everything is determined by supply and demand, nothing more. Is the public buying stocks or selling? They are selling. How can the rally last if there are more sellers than buyers? It cannot. This is a fools gold rally and should be sold into, IMO.
I looked dumb when the market rallied for weeks when I said (over and over) that 1200 was NOT the low and we would go lower but was proven correct. This low will be revisited, long term is my guess. Huge moves to the upside have ALL been made in bear markets, as I have mentioned, not bull markets. Bull markets are slow grinds higher based on fundamental - not parabolic moves based on short covering and greed. This move will NOT last, eventually, in my opinion.
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