A while ago, when I called the bottom at 850, it was clear to me that the market undercut its fair value due to the panic selling. At the moment S&P fair value is around 930 based on normalized forward P/E.
We were in a selling climax and the pattern ran its course. DJI punched through its 30 year trend line initiated by the crash of 87 and closed the week above it. In other words, pattern resembled the originator as I predicted weeks before the crash.
Considering we have passed the most intense part of the credit bust, and we had a capitulation phase in the market, it is likely that we will make a smooth transition to the expansion cycle from here on. These were my fundamental thoughts.
A few days later, Warren Buffet came out and told us that he is in shopping spree followed by John P. Hussman, trying to justify current valuations with a letter to his clients.
One of my trading and investing principles is to search and keep an opposite opinion to my positions after I begin trading a new trend. This opinion helps me to awaken when I am soon-to-be-wrong.
As usual, I have been seeking them since the the day one and I haven't find much in the fundamental universe but they were all on the charts.
Very long term trend structures are severely distorted, some of them are completely broken. And these investment titans, orchestrating a market bottom is disturbing me. They have never been right about market tops and bottoms at the right time and they will likely be wrong about this one too. Of course they can stand through another 20-30% selling and be eventually right but this is not what I can stomach.
While I must still keep a bullish stand going forward, because of the reasons I mentioned above, I am watching for the unexpected to come in true. Keeping an eye on the things that bother me because all along my career, it's been my experience that the writings on the charts eventually became the reality.
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