Stock Markets Face 'Meltup': Strategist

[pa28]

http://www.cnbc.com/id/33375999

'Despite recent warnings that the rally may be over, stock markets face a "meltup" as institutional investors will now feel obliged to buy for returns, Philippe Gijsels, senior equity strategist at Fortis, told CNBC Monday.'

"A meltup is the opposite of meltdown, as investors feel forced to buy in the market so they wouldn't miss profit opportunities; but fundamentals don't justify this fervor, Gijsels said."

"The rally is artificial and government-driven and "it's a dangerous situation" because fundamentals are weak, Gijsels added."

Despite the source the info is worth considering. A rally as profound as we've seen should end with increasingly rapid changes in price (trending to the upside despite forward earnings and fundamentals that seem questionable) so I found myself agreeing with the writer.

P.S. I noted that some DU'ers called last year's oil spike very accurately as well as the market bottom in March. This seems like a pivotal time and I'm curious about the prevailing mood here. Who is in and who is out. Opinions anyone?

[Lasher]

1. I've been back in for a few months now.

Made 28% on my investment over a period of about 4 months. Early last week I multiplied my investment by a factor of about 5. Since then I'm still up almost 1% despite Friday's losses and it looks like there will be more gains today.

[eridani]

5. Just remember to get out before the bubble bursts n/t

[wuvuj]

2. Seasonally...

...the market usually sees a low at the end of Oct...then rallies into the end of the year.

Basically...they've put a big bandaid on a bad injury and have said...ALL BETTER with a big smile. Now....if they can continue to fool a lot of people things might go on OK for awhile.

I think Wall street has shot itself in the foot...and a lot of people aren't drinking the koolaid anymore?

IMO...there's always that wall of worry...but this time I think they've finally done some serious financial damage...not to mention wars....energy prices and global warming...we're moving into a NEW NORMAL?

Eventually reality will set in.....? :crazy:


http://www.hussmanfunds.com/wmc/wmc091019.htm

In reviewing the status of the market late last week, the condition of the data was something of an anomaly in that regard. On the valuation front, stocks are presently overvalued, but to levels that we've observed at least several times in history. The anomaly relates to market action, where we can no longer find a single historical instance where stocks were more overbought on the combination of short- and intermediate-term measures we respond to most strongly. Indeed, only one instance comes close, which is November 28, 1980.

Now, if that date doesn't ring a bell, I have to admit that it didn't resonate with me either at first. On that date, the stock market was just a few months into a fresh economic recovery following the 1980 recession, employment conditions were just beginning to improve, capacity utilization was picking up, the Purchasing Managers Index had just moved back over 50, and stocks were certainly not overvalued on the basis of normalized earnings or cash flows. Indeed, the P/E multiple of the S&P 500 was just over 9, on the basis of both trailing and normalized earnings. Advisory sentiment was not strenuously bullish either, so there was little to identify it as a date to remember.

As it happened, however, November 28, 1980 was the peak of the furious advance in S&P 500 driven by enthusiasm over "less bad" economic news, though with little proven economic strength. It was the last day of the 1980 bull market. The economy later proved to have been in a short lull within a double-dip recession, taking stocks to their final lows in 1982.

...

So right now a lot of bullishness...P/Es skyhigh?

[pa28]

9. I like how Art Cashin keeps referring to this as a "tainted banquet"

To extend the metaphor a little bit it may be a while longer before the poison takes hold.

BTW enjoyed the link. This market is vastly overbought but as long as the fed continues to sponsor the banquet going short seems even more dangerous.

[jschurchin]

3. S&P P/E 140??????

140? Yeah OK, only a idiot would jump into this. A fool and his money are soon parted.

[Uben]

4. I'm out

I went from holding 62 positions earlier this year to 4, now. I have sold off over 90% of my holdings and am waiting for the "shit to hit the fan". It's all a gamble, but I can't sit by and watch my money disappear again without doing anything. While it is has been hard watching the market go up without being in it, I take some comfort in knowing I am not vulnerable to another "dive".

[Warpy]

6. I have plenty of cash in reserve

and that's where it's going to stay.

This rally is being fueled by institutional investors with government cash and by foreign investors taking advantage of the slide in the dollar.

There is no way my reserve cash is going into the market right now. I can see another slide in the future as earnings drop due to the slow collapse of the consumer market and the awful realization that businesses can't survive very well unless people are able to buy their goods and services dawns on the cold hearted investor.

Money always seeks a return on itself, either through interest, dividends, or appreciation of assets. It will go where it can find these things and my guess is that it will start to pull out of the US market and go offshore.

(BTW, as far as oil goes, until the slide in the buck is stopped by raising revenues and cutting military expenses, we're going to see prices at the pump go up. My best guess is that they'll be around the three dollar a gallon area, that it takes an oil man administration to get them up to four)

[pscot]

7. I put about 20% of my stash

into gold stocks back in march. The rest is in cash, and will stay there for the present. I have to admit, I've been tempted by the move in energy stocks, but I don't trust this rally.

[girl gone mad]

8. This is a complete myth.

From http://online.barrons.com/article/SB125573658219691061.html">Michael Santoli:

• "Portfolio managers are trailing the market and might need to rush into stocks." Actually, portfolio managers are enjoying the gift of a wildly broad rally, which has made outperformance of the indexes the norm. Lipper, the fund-tracking concern, reports that the average U.S. equity fund is about five percentage points ahead of the Standard & Poor's 500 Index. And the long/short equity category of the RBC Hedge 250 Index -- which should, by holding some shorts, lag behind an up-market -- was beating the S&P 500 through September.

[pa28]

10. Mutual fund or hedge fund cash influencing price is the weakest part of his idea.

Government cash at zero borrowing cost flowing through brokerage institutions reorganized as banks is worth considering though. Until the fed vacuums up some of the excess monetary base that "capital" seeking fast returns could make life interesting.

[wuvuj]

11. Why the market rallies?

http://www.moneyandmarkets.com/bernanke-gone-berserk-bank-reserves-explode-4-36033





The Consequences

This overabundance of high-powered money flooding into the nation’s banking system and money supply can have only one consequence: To cheapen the value of each dollar you own.

Yes, Mr. Bernanke has temporarily tamped down the Wall Street debt crisis. And yes, he has managed to replace fear with greed … convert the flight to safety into the lust for risk … and transform falling markets into rising markets.

But look at the price we are paying:

* The solvency concerns regarding major financial institutions have now been replaced by looming solvency threats to the U.S. government itself.

* The debt crisis of 2007-2008 has been transformed into the dollar crisis of 2009-2010.

.....

So if things were bad enough for these extremes...might be a little foolhardy to jump in with both feet?

Not so sure it's going to go up and then just consolidate.....