Monday, November 26, 2007

Are We Having Fun Yet?

Today was another example of why I hate strong market opens. The market basically peaked for the day in the first half hour of trading, and closed at its lows for the day.

Bond yields plunged, with the 10-year yield falling all the way to 3.85%. It is clear that there is strong concern out there about the possibility of a US recession combined with an overall global slowdown. No other way to explain the plunge in yields.

Oh, but the Fed will tell us again this week that the risks of inflation are still present. The bond market is mocking the Fed, and its too bad these guys can't get fired for their cluelessness.

The market simply can't rally lately without the financials. Even as we are deeply oversold, and due for a big bounce. Sentiment is growing increasingly negative as well, reaching levels previoulsy seen at prior market bottoms.

I sold my emerging market plays today, as those investments are still up a lot ytd, and look like they still have downside risk. But I still believe we are due for a nice bounce, even as I may have been early in calling for it last week.

Look at the spike in the VIX today compared to prior market bottoms. Ditto for the 10-day put/call ratio, and the AAII bull/bear survey as well. And don't forget relative valuations, which now show stocks overall to be as cheap as they were at the market bottom in 2002.


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