StockFetcher Forums · General Discussion · Will Good News Once Again Lead to a Market Crash?<< >>Post Follow-up
6,362 posts
msg #49961
Ignore TheRumpledOne
2/12/2007 8:37:26 AM

Will Good News Once Again Lead to a Market Crash?

By Andrew M. Gordon

Could you hope for better news than this? When the 12 biggest Wall Street firms were asked how U.S. stocks would do this year, all of them said they will rally. You could take this unanimous vote and run to the bank with it, laughing all the way. But I wouldn't do that quite yet.

As big and powerful and all-knowing as these Wall Street outfits are, the last time they all agreed on a market rally was in 2001. And the S&P 500 lost a third of its value over the next year.

You should greet these pronouncements from Wall Street not with a big yawn (because what Wall Street thinks does matter) or a smirk (because they're not always wrong!) but with questions that seek to clarify, confirm, or disprove. As far as this latest rally prediction goes, these are the questions I'm asking myself:

Is the market rally dependent on a soft landing by the economy?
Is it dependent on the Fed lowering rates early- to mid-year?
Does it presume that inflation will be held in check?
Does it count on oil and energy prices remaining low?
Does it count on the worst of the housing market slowdown being over?
Does it assume our exports will be keeping pace with or bettering the pace of imports?
There are a dozen more questions I'll be asking, but these are the main ones. How you answer them will go a long way toward helping you determine for yourself the believability of this market-rally prediction by Wall Street.

745 posts
msg #49972
Ignore maxreturn
2/12/2007 2:04:15 PM

More often than not such consensus is a good contrary indicator. As for all the other fundamental charts tell me all I need to know about which way the market is headed. Too many funny mentals causes confusion. Charts with a few select indicators and support and resistance is all you need.

48 posts
msg #49975
Ignore astroanalyst
2/12/2007 4:44:01 PM

With "Wall Street" making such "Jedi Mind Trick" pronouncements and the media thoroughly co-opted by subjective mis-information, 'tis time for the sheep to guard their fleece. My contrarian nature is telling me this is nothing more than lulling the flock into getting caught in "weak holder" positions, as the "smart money" continues to sell into what strength may remain and then "put" on their "shorts" for a nice ride to the downside...

"Crash"..."Soft Landing" way or the other, we'll see...I'm strapping my helmet on as I write this...

Thanks for sharing, TRO...

18 posts
msg #49976
Ignore killertrader
2/12/2007 7:57:36 PM

Went bearish this week. Pulled out TRO's "Kiss of Death" filter, and a few others. Doing good so far.

745 posts
msg #49978
Ignore maxreturn
2/12/2007 9:47:08 PM

Wouldn't be so quick to jump in the bearish camp just yet. Just look at the weekly chart and the orderly uptrend on the daily chart. Market likes to rally after low volume dips to the rising ema's.

6,362 posts
msg #49985
Ignore TheRumpledOne
2/13/2007 12:23:54 AM

For the record, StockHolyGrail, aka Mary4Money, taught me the KISS OF DEATH.

745 posts
msg #50018
Ignore maxreturn
2/14/2007 3:23:25 PM

Wonder how the shorts are doing? I bought the OEX 665 call when the SPX bounced off it's EMA20. Coincentally, the VIX made a multiple day high the day before on a low volume price decline. Also at a key fib area. Pullback trades don't get any better than this!

6,362 posts
msg #50094
Ignore TheRumpledOne
2/17/2007 1:49:29 PM

Don't Listen to Wall Street; Think for Yourself
2/16/2007 1:19:51 PM
Prechter's Market Perspective

Independent thinkers. These are the kind of people who become interested in Elliott wave analysis of financial markets. And we welcome you here, because we know that most people never get past fundamental analysis of markets. You, though, are our kind of thinker someone who realizes that technical analysis, with its focus on price charts and price trends, can help cut through the babble of information that fundamental analysts (and also the media) usually focus on, such as earnings reports or the business environment. If you've ever wondered why you started to question the advice you get from brokerage firms' fundamental analysts, then this excerpt from Bob Prechter's Conquer the Crash is for you.

* * * * *

Excerpt from Conquer the Crash, You Can Survive and Prosper in a Deflationary Depression (published by John Wiley & Sons)

Throughout my career, I have advised people not to trust a brokerage firm's "fundamental" (as opposed to technical) analysts to warn you about anything. Brokerage firm analysts are notoriously poor at market timing. Besides being beholden to their corporate clients, which gives them an extreme bullish bias, most of these analysts use the wrong tools. Even when they are independent thinkers, they are usually not students of market psychology and thus have no idea how to figure out when a stock is probably topping.

In fact, brokerage firm analysts are typically cheerleaders for a stock just as it is topping out and during most of its fall. Over 20 years ago, when I worked as a Technical Market Specialist at Merrill Lynch, I watched as an analyst kept a "buy" rating on a maker of CB radios while its stock dropped from 19 to 1. Nothing has changed. According to reports, 11 out of 16 analysts covering Enron had a "buy" (some even emphasized "strong buy") on the stock four weeks before the company declared bankruptcy and well after the decline in the stock price had wiped out its investors.

As most people have subsequently learned, brokerage firm analysts almost never use the word "sell." If they really think a company's stock is dangerous, they label it a "hold." The problem with trying to follow this guideline, though, is that they usually label a stock that way after its bear market has run most or all of its course. To avoid being hurt by these strategies, you need independent market analysis.

745 posts
msg #50100
Ignore maxreturn
2/17/2007 3:22:57 PM

"To avoid being hurt by these strategies, you need independent market analysis."


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