Daily Investment Interpretations

February 6, 2011

2012-2-6: (Monday Night): The markets slipped slightly today: Stocks drop on Greece; Lack of Deals in Greece Push Stocks Lower; Bulls Fight Back. The NASDAQ Composite fell 3.67 (-0.13%) to 2,901.99. The Dow declined 17.1 points (-0.13% to 12,845.13; the S&P 500 backed up 0.57 points (-0.04%) to settle at 1,344.33. Oil ended at 96.87: Oil edges higher; gold retreated to 1723: Gold, copper slip further. The VIX rose 0.66 points to 17.76.
    Things have at least temporarily quieted down in the Eurozone, and today's employment news was unexpectedly good.
  
    Marketwatch says: 
    Europe to Greece: Cut a deal now, or else  
    Greek party talks on bailout delayed to Tuesday  
    China's fortunes hinge on ... Greece  
   
3 stages of a bull market:  
"1) 'What bull market? The fall is right around the corner' Most of the signs of an uptrend are already here – money is leaving defensive names in order to chase higher yield, breadth is improving, correlation and volatility decline substantially. Despite of that, many people don’t believe the rally and prefer to short “overbought” names, only to get squeezed by the tidal wave of monstrous accumulation.

"The fastest price appreciation happens in stage 1 and stage 3.

"2) Acceptance stage

"More and more people gradually warm up to the idea that we are in an uptrend and the market should be considered “innocent until proven guilty. Stocks have been going up for awhile and the minor dips were short lived.

"Between stage 2 and stage 3, there is usually a deeper market pullback, which tests the resilience of the rally, shakes weak hands out and allows for new bases to be formed. The deeper pullback is used as a buying opportunity by institutions, which missed the the initial stages of the rally and their purchases push the market to new highs.

"3) Everything will go up forever

"During stage one, most people are skeptical, because the market has just come from a high-correlation, mean-reversion environment and most are unwilling to see the ensuing change in market character. In stage two, investors gradually turn bullish for the simple reason that prices have been going up for a while. Analysts and Strategists are also turning bullish in an attempt to manage their career risk. In the third stage, most market participants are ecstatic, not only because prices have been going up for a while, but because they personally have managed to make a lot of money. Everything seems easy, the future looks rosy and complacency takes over proper due diligence."

"I believe that we are near the end of stage 2."

    China central bank move could be hawkish signal       
    Hong Kong tiptoes into slump  
      
    State of the Markets articles include:   
    Greece Update: Where Things Stand on Current Negotiations  
    Fitch Alters Ratings on Italian Banks
    IMF: China's Economy At Risk If Europe Crisis Worsens 
    German Manufacturing Orders Above Consensus    
 
    Market futures are neutral tonight.