Re: Any guesses on trading range between now and the end of the year?
My views should be pretty well known by now since I stuck my neck out about 10,000 level long ago...
Since 2008 some of the lurking problems have gotten worse in our national and international economies . The textbook solutions are being rejected and no one nor national population wanting to feel the pain... with too many nations opting to let the others cut back while they still do their free spending ways...
Obviously everyone has to pull in the same direction or the goal will not be reached if some pull in different directions or the few who do not pull at all.
In earlier times we could of just looked at our economy and with a high degree of certainty be able to predict near term trends. But our global interlocking structure makes this impossible now and so you have to look at various political problems and events along with multinational economies. A lot more variables to consider with a traffic jam of balls to juggle.
Need to reconsider what could make the general market to go up in face of the well advertised problems . Hard to get overly optimistic with the breaking news reports the last couple of weeks. The only way for the high this year not to be already on the books is for developments to solve some of the current problems and coupled with the traditional year end rally that looks optimistically toward the next year , we could see a new high set then.
The uncertainty is high with far too many ifs and for speculative euphoria to return to this market, which is absent now, to give the percentage of chance to attain this new high much of a passing grade beyond D+.
So my bet would be that the events needed to reach new highs will either not succeed or will be too weak to bring the market back up to new highs. Another words... the last 52 week trading range has already set the high mark.
So turn to the current dilemma of whether we are going to keep a fairly narrow trading range that virtually goes sideways. Hard for me see how much longer we can stay stagnate . My reasoning is that our current and varied problems around the world with the uncertainty which the market hates plus the election year uncertainties will spook the market into wider swings and trading volumes which will favor the downside slide ... primarily due to the severe and dramatic nature of some of these problems which will be life changing events with prolonged consequences in our futures and the next generation. The general worldwide population is being made aware that the magnitude of these problems cannot be ignored and every solution put forth so far will hurt stock markets around the globe. In spite of this the markets remain at higher levels than you would expect due to optimism that politicians will reach acceptable solutions when faced with failure and harsh consequences. So far this optimism has been badly served and seems a false assumption. Greece is just one example.
I come back to the consumer.
(1) Employment has to gain just to adjust for the ever new population entering the job market. We seem to be failing in this goal.
(2) Those who are working face cutbacks in their wages either by being cut back in the number of hours worked or rate of pay for those hours ... or in some sad cases ...both.
(3) I keep good records how much certain equipment I buy costs each year.... some tools have jumped this spring by 50% over last year ... yet the government says there is no inflation. Hard to trust the government figures... well established fact that if they were totally honest the SS payments would jump and suck a lot of money out of the budget. It is very self serving for the government to keep the official inflation rates low , not only for SS but selling all those govt. bonds.
(4) Lately the tip of an oncoming iceberg has hit the radar... India, Australia, China, and Europe have all indicated that their exports/imports have slowed down and this trend seems to be speeding up. This is a huge trend that cannot be turned around in a timely manner ..plus these countries are going down in tandem now but might not go up in tandem nor at the same rate.
(5) The consumer needs to continue to spend ... but with employment news constantly being gloomy and the worldwide economy constantly hitting the headlines with predictions of a global meltdown, the consumer has been cautioned to be prudent by many well known financial gurus and pay off debts and put some aside for a rainy day. This is good advice but if too many follow it the economy will more quickly go into a tailspin as money stops being spent for goods and pays off debt or squirreled away for the rainy day, predicted soon to arrive, which will freeze up our national economic engine.
(6) this stock market went up based in part on companies cutting employees, cutting expenses and paying off debt. The stocks went up on better earnings from these efforts but revenues often were not growing or even weaker. Now few if any employees can be laid off any more than they already have been... ditto cutting expenses or paying off debt. Revenues have to grow in the face of consumers slow down in spending.... also the stocks have P/E multiples that have built in expectations which are likely not to materialize. Hard in our current status to see a happy ending here.
So it is difficult for me to shy away from my previous and well publicized notorious 10,000 test. THis is also based on the fact that Wall St. lemmings overrun logic or fair values and push marks well below the expected highs or lows previously estimated. The dramatic swings are part of the DNA of Wall St. with over a century of trading history proven that in the short run fear and group panic rules the day and only logic, accounting and fair value considered over the long term. With 2008-09 still being remembered by the general public and professionals this will enforce the need to act soon in any downward trend starting to gain momentum. So I think human nature will remain true to itself and panic and fear will run the market down below expectations. It will be bloody and financially ugly.
At the moment when you put the up possibilities on one side of the scale and the downside possibilities on the other side of the scale.... It is no contest, in my opinion. The only question is how far will it go? I think nothing will be safe in this state. The winners will be sold to raise cash and before they can get sold off at the ever lower prices and those in red ink area will be sold to stop the pain from getting worse, The only way to win is to not be in the game. IF... if this scenario takes hold then the early exit folks will benefit over the "wait and see" laggards. --This includes the mutual fund investors. Only very temporarily will cash be king.... it must be put to work at opportune entry points.... yeah I know.. easier said than done.
Old fashion values of P/E, Dividend yields and how well they are covered by earnings, and debt levels... etc will be more in favor than high tech companies with no earnings or dividends to support the stock price.
trading range... 52 week high already reached ... low --below 10,000 ..
Now with as multi faceted as this topic is , there must be others with different views AND reasons, so if you wish to disagree then please do so. This forum is used for an exchange of ideas and to help the educational process. Therefore it is important for many to participate in this discussion.