As you all know, I am out on a limb with my “prediction” of a fall market rally (which seems to have begun) this October. Now, don’t go shaking my limb, as I am barely hanging on as it is. In any case, I am out there, so I might as well keep on saying what I believe …
Investors are increasing bearish trades around the world by the most in at least five years, convinced the lowest valuations since 2009 will prove no barrier to losses after $11 trillion was erased from equities. Borrowed shares, an indication of short selling, climbed to 11.6 percent of stock last month from 9.5 percent in July, the biggest increase since at least 200.
On the surface, the above news might convince one that I am wrong and we are headed for even steeper losses rather than a rally. Maybe, if you are a pessimist. However, if you are a contrarian, then the above news is good. If you are a contrarian who believes the worries over Europe and the global economy are easing, then the news is really good. If you are a cyclist, one who believes in repeating cyclical patterns, the news below should really thrill you …
Bearish bets last increased faster in March 2009, the same month the S&P 500 began a bull market that doubled its value. The surge in equity prices came seven months after NYSE short interest climbed to an all-time high in July 2008.
I am a big believer in the macro-cycle, repetition-pattern theory, as smaller scale cycles are too exposed to the daily machinations of man to be reliable. The above is a medium-cycle pattern, so I am somewhere in the middle, but I like the odds of repetition here given the recent news out of Europe and the recent slight but real turnaround in the U.S. and global economic indicators. In fact, I might not be alone in my thinking as the excerpt below suggests at least some unidentified “strategists” on Wall Street are thinking even bigger than I am …
Wall Street strategists say the S&P 500, after falling within 1 percent of a bear market last week, will post the biggest fourth-quarter rally in 13 years. The measure will climb 13 percent to end 2011 at 1,300, according to the average estimate of 12 strategists surveyed by Bloomberg.
This would be nice, a rally of such proportions, and it could happen if Europe announces a comprehensive plan to contain the debt crisis in just about three weeks. It could also happen if corporate earnings come out on the plus side once again. And it could also happen if the economic news continues to be “not bad.” Whoa! I just thought about what might happen if all three happened simultaneously. Now that would be something, indeed …
Well, nothing like a bit of “not-so-good” news to dampen the energy of a positive dream …
India’s 10-year bonds fell the most in almost two years after underwriters had to pick up government debt that went unsold at an auction last week, fueling speculation demand for the notes is waning.
Trade in the day – Invest in your life …
