The new paradigm for stocks is not to invest, but to trade the moves. This is the new mentality for those that buy and sell stocks. It used to be buy and hold, but not anymore. Everyone is on to the game and know that they were sold a load of bull by the mutual fund industry with the buy and hold mantra over the years. From what I see, the longs don't believe in this rally, meaning that upon signs of weakness, they will bail out of their positions quickly. They are trading the market, not investing in it. They are what one would call a weak long. There are a lot of weak longs in this market. The shorts are mostly absent. They are either buried 6 feet under or have been conditioned to cover quickly on any weakness or cut their losses immediately for fear of getting their face ripped off. Most people are deathly afraid to short this thing after having been burned shorting repeatedly for 7 months.
Weak longs + Absense of shorts = Free fall waiting to happen.
Thursday, October 22, 2009
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3 comments:
Yeah I agree. Buying stocks for the long run only works when the economy you're in is in a long term growth mode.
Post ww2 peacetime expansion was able to make that happen for the US because up till that point the US was basically an emerging mkt.
You had your technology revolution which increased productivity in the 80's and 90's.
Now there is no more growth as far as I can see. It's a demerging market. Now you can't say buy and hold anymore.
while i agree with you on potentional free fall as there are no shorts and weak longs, there could be still a lof of underperforming managers trying to catch the performance for the year.
but if there is big selling into the end of year, it could easily scare them...
Underperforming fund managers aren't waiting for a free fall to get long, they want to buy a 3-5% correction.
If it turns into a 12-15% correction and we break 1000 on SPX, they will be the ones puking things out when things get hairy because they're the ones who think this is just a long bear market rally.
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