I may have information that Bank X Y and Z is sitting on paper that they can't sell at par. They decide to sit on the paper but I know they can't afford another mistake
So I short the bank stock but the market stays irrational and even goes up, which kills my margin acct. I have to exit my position. I acted too soon and my timing was terrible.
I look at a few [many] other fundaments and think, given enough time, the market will have enough info for at least a severe correction. This looks so much like a repeat of the credit crisis, with a few extras such as trade tariffs etc. that recession comes to mind loud and clear. How could we repeat those mistakes. Maybe because even in a short time, many have forgotten the details of the last credit crisis. At least that is the only thing I can think, that makes any sense. I know the banks have improved their capitalization, so I ask, how did they get caught with this paper. I don't have a good answer, but I know this spells trouble. Are we creating another but different bubble. I ask myself, how long has the world printed money since the last credit bubble QE 1,2,3 I lose track of the world money printing machine. All this money is searching for yield. The banks actually discourage savings. The banks make money on lending and the printing press has created a giant bubble. The economy is strong. Of course with all this money that has to look for yield. The stk market is the easiest place for 401K and assorted other funds to invest large amounts of money. But why have the banks got this paper they can't sell??? Why isn't the money machine creating money to buy this paper.
What happens when the tariffs cause higher consumer prices at Wall Mart. Is the increase in wages enough. Many shoppers at Wall Mart are on social assistance. Will they be able to buy the same amount of stuff at Wall Mart??? And don't forget, the Fed changed course, and people have not thought about the ramifications of the Fed actions. There is no Fed put. Money market funds know this. So the bond market gets into the act and still the paper does not sell.
The market does not want to buy debt at par. The money market funds are worried about risk. So the paper is not bid at par and the banks need to sell at par.
However, the stk market seems to be fixated on lines of resistance, moving averages etc which I believe will be blown out the window, once we see the effects of other events. I can even forget about AAPL.[which is a huge chunk of the market] and the trend for AAPL in P/E ratios compared to the average. Perhaps I do not share the same thoughts about AAPL and the other biggies in the index. Just looking at AAPL. On Jan 27 2016 AAPL P/E was bid at 9.9. On Sept 4 2018 AAPL was at 20.7. I know AAPL had an increase in dividend of approx. 70 cents/share but does that not spell bubble ???
Now on to other things that are different from 2008/9. I don't think there will be a sudden end to trade tensions with china. Germany seems willing to hitch a trade ride with out the USA as a trade partner. Japan is opening up their domestic markets but excluding the USA Russia has been sanctioned repeatedly and yet their trade with oil to china and avoiding SWIFT seems to be working, plus Russia must be producing something other than oil to keep their economy at least the same as before the sanctions [wheat sales from the Black Sea to world markets and taking wheat market share from the USA is one example] which means the USA is not all powerful in the world of settlements or market share in world markets. and not just soybeans but also wheat, just in case you missed that loss of market share and etc. etc.
I look at all this and say to myself "bubble" How can a 400 sq ft condo space cost or be worth 500,000 dollars [even at our loonie value] in Toronto, Ont. I will not budge on my long term bearish sentiment. Of course a person could say a blind squirrel will find a nut some day.
The simple answer is yes, fundamentals rule.
But, technicals play a part. Techs rule the range of price.
Do price ranges get exaggerated? Sure.....by money flows.
That is where opportunity lies.
I would agree Jim
I have always believed that
Foudamentals provide the direction of the move
Techs. Prvide the range of the move
Information flow provides the timing of the move
One could make the argument that the "algos" are counter fundamental.
The funds being very large and not always in touch with short term fundamentals...
But the fundamental that counts the most is where is the balance between buyers and sellers. What is the balance of the money that is in the market