Despite the gloom and doom out there, I think in the short term market is going up. My proprietary model (more on that later) is up 7% for the year (with 15% up this month) suggest in the short term market will go up. Here are the reasons why:
* Sentiment is very very bearish. Huge short positions have been built in the anticipation of a greek default. Investors are very bearish too (last week's AAII bullish reading was only 25%, close to panic levels).
* Data has actually started to stabilize and improve (Today's durable goods report is another good set of data). Despite what has been written, there is currently little confirmation of start of a new recession.
* Europeans have finally begun to realize the gravity of the situation. Hopefully their inept leaders will realize that it's cheaper to bailout Greece than to bail out themselves in case of financial meltdown.
I think we are beyond the 'panic' selling that we saw in August and September, the market will now focus on PMIs and health of global economy and unless these readings hit lower than the already weak expectations, I expect market to go up -- maybe up to 1250-1265 level before November.
My proprietary model flipped from short SPX to long SPX on September 21st with SPX at 1162.
* Sentiment is very very bearish. Huge short positions have been built in the anticipation of a greek default. Investors are very bearish too (last week's AAII bullish reading was only 25%, close to panic levels).
* Data has actually started to stabilize and improve (Today's durable goods report is another good set of data). Despite what has been written, there is currently little confirmation of start of a new recession.
* Europeans have finally begun to realize the gravity of the situation. Hopefully their inept leaders will realize that it's cheaper to bailout Greece than to bail out themselves in case of financial meltdown.
I think we are beyond the 'panic' selling that we saw in August and September, the market will now focus on PMIs and health of global economy and unless these readings hit lower than the already weak expectations, I expect market to go up -- maybe up to 1250-1265 level before November.
Model Update:
Current Position: Long SPXMy proprietary model flipped from short SPX to long SPX on September 21st with SPX at 1162.
