Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Stock Market Reaches For New Highs Even As Risks Rise

Stock-Markets / Stock Markets 2013 Sep 14, 2013 - 04:59 PM GMT

By: Sy_Harding

Stock-Markets

The stock market took advantage of the lack of economic reports this week to rally back toward its bull market highs.

The previous week’s economic reports, particularly the dismal employment report last Friday, were forgotten as the threat of a military strike against Syria faded.


Concerns about the Fed dialing back its QE stimulus remained in the air. But that worry retreated also. The consensus opinion is that the weak employment report will force the Fed to do very little if anything except emphasize its intentions to do no harm by taking it slow and easy with any taper.

Meanwhile, ignored by the market, the economic risks worsened.

Even though there were very few economic reports this week, what there were did not paint an encouraging picture.

It was reported Friday that Retail Sales were positive by only 0.2% in August, the smallest increase since April, and less than half the consensus forecast for a 0.5% improvement. The University of Michigan/Thomson Reuters Consumer Sentiment Index plunged from 82.1 in August to 76.8 in September, a five-month low. The Producer Price Index was up an unexpected 0.3% in August on the back of higher food and energy costs. And the Mortgage Bankers Association reported that mortgage applications fell by 13.5% last week.

Against that backdrop, next week returns to a normal schedule of important economic reports, including the first look at the housing industry in a while, with the Housing Market Index, New Housing Starts, permits for future starts, and Existing Home Sales.

And the Fed’s highly anticipated ‘will it or won’t it’ September FOMC meeting will begin on Tuesday, with its QE taper decision being announced on Wednesday, and Chairman Bernanke’s often provocative press conference following after the announcement.

Can Chairman Bernanke pull off the potentially confusing balancing act of lowering the Fed’s economic growth estimates again, as it’s expected the recent economic reports will force it to do, while at the same time convincing markets that the QE stimulus, which has been the main support for the economy for five years, can now be safely dialed back?

Meanwhile, on the market’s continuing rally, Goldman Sachs reported that the market’s gains this year have been driven much more by the expansion of Price/Earnings multiples than earnings themselves. That is, the willingness of investors to pay higher prices for stocks regardless of slowing earnings growth. The report notes that of the S&P 500’s 18% gain this year, only 5% is related to earnings, and 13% due to an increase in the Price/Earnings multiple investors are willing to pay.

Will so-called smart money continue to be wrong with their concerns over such situations, while public investors have been so right in pouring money into mutual funds and ETF’s at a near record pace this year?

That divergence in expectations apparently continues.

The Consensus Inc. Bullish Sentiment Index of professional investors reached a high 78% in March and has plummeted to 50% since. Meanwhile the poll of its members by the American Association of Individual Investors (AAII) has moved in the opposite direction. It jumped to 45.5% bullish this week from 35.5% last week, and from only 28.9% bullish in August. (Not that it necessarily means anything, but it was at 45.1% bullish the week of July 25, the week before the ugly August market correction began).

And while bullish investors are making profits with their renewed confidence this year, hedge funds have had too many bearish positions and are having one of their worst years ever.

Even Stanley Druckenmiller, founder of Duquesne Capital, and former portfolio manager for George Soros’ Quantum Fund, with one of the hedge-fund industry’s best long-term track records, said this week that he is “lost” regarding this market. In a rare appearance on Bloomberg TV he said, “My guess is I believe the market is topping . . . But right now I’m lost. I don’t play when I’m lost, because I know in the future I won’t be lost.”

Investors and the media may not believe that hedge funds won’t continue to be lost. As always, investor sentiment turns quickly, and in spite of their long-term records, hedge funds are being written off as no longer being ‘smart money’, as evidenced by articles like that in Bloomberg BusinessWeek in July titled ‘Hedge Funds Are For Suckers’.

There is no question, as this week showed, that smart money continues to be wrong with its nervousness, and non-professional investors continue to be right with their enthusiasm and confidence.

How much would I bet it will continue indefinitely? Not much.

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2013 Copyright Sy Harding- 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.

Sy Harding Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules