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Monday, November 10, 2008

Strategists Expect RECORD Year End Rally

Not bloody likely…

Believing in Estimates Means 20% Advance for S&P 500 (Update1): “Even after cutting estimates at the fastest rate ever, Wall Street strategists still need the biggest year-end rally in the Standard & Poor's 500 Index for their forecasts to come true.

David Kostin of Goldman Sachs Group Inc. predicts an advance because U.S. companies are cheap relative to earnings. Strategas Research Partners' Jason Trennert is counting on a resumption in bank lending to lift equities. Thomas Lee at JPMorgan Chase & Co. says stocks are swinging so much that a 25 percent jump by Dec. 31 isn't out of the question.

Strategists were also calling for a record gain at this time last year, after the first quarterly decline in corporate profits dragged the S&P 500 down from its high of 1,565.15 on Oct. 9. It never materialized and stocks have dropped 41 percent since.”

Despite a terrible non-farm print (especially the revision) and scary news out of GM, the market rallied off support around 900. Apparently the market was expecting far worse, had priced that in and was then relieved.

There is resistance around 962 and then again around 985 before that psychologically important barrier of 1000.

For this ‘record’ gain that the so called strategists are calling for, the S&P 500 (SPX) must first clear that 1000 level. Volatility is certainly high enough for moves of that magnitude. But under no circumstance would that kind of rally be in any way sustainable or long lasting.


MAB said...


I predict profits continue to surprise on the low side for years.

Household debt levels are unsustainable given the lack of income growth. As household borrowing falls, so too will corporate profits.

I'm certain gov't liabilities will increase massively in an attempt to prevent a credit deflation. Regardless, our relative standard of living vs. the rest of the world will fall.

Can there really be any other outcome?

Anonymous said...

i still think we are in a bear pennant pattern for most of the indexes and currencies but those wave theory people are freaking me actually looks like we should have a short rally thru the new year. i cant imagine how we will get the strength to say rally to 1100 on the spx but it looks valid.......

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