Wednesday, August 19, 2009

Quick view of the market (stock/trading)

I've heard more and more over the past week or so from these CNBC pundits and the like that they think the market is in or due for or heading towards a correction. I'm sure today's turnaround didn't help them sell that idea. My view is that there will be no correction, at least in the near term. Between the large amount of shorts still out there and the large amount of money that's still on the sidelines, I can see this market continue to drift up. However, even if there is a major pullback, I still don't see it as a correction. Rather, I would see it as reality setting in and people realizing that the high unemployment and downward cycle of the real estate market will continue to take its toll. Besides, where are all those toxic assets from before? They're still on someone's books aren't they?

So my feeling is that we're either going to keep going at this level and higher or we're going to fall off a cliff again. I just don't see some "correction" that pulls the Dow back to 8000 and then shoot back up to the highs. Anyway, just my thoughts.


wildman said...

Maybe the market is being held up by technical factors like money on the sidelines and shorts in the market. I'd be looking for inflationary pressures in the coming months to become the dominant reason for the market holding up despite a continued bad economic climate. Have just finished reading another book by Milton Friedman, and he points out that the impact of increasing the money supply if felt by growth in the first 6-9 months (which is why gdp hasn't been attrocious in the latest reports) and then price increases on the time frame of 12-18 months. If we think about when the Fed started acting, we are getting into that window right now. Look out...S&P all time highs here we come.

The Pretender said...

I've written before that I'm one of those who believe in hyperinflation to come, and I certainly don't like the fact that the Fed started acting and hasn't done anything in the other direction. I do believe that inflationary pressures will have a big effect on the markets if they haven't already. I'm just not sure about the time window whereas you seem to have a more specific one in mind.