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S&P Futures Now Down 17 Handles!

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May 25, 2010 – Comments (20) | RELATED TICKERS: SPY , IN.DL , TBL.DL

Anyone still thinking this is just a simple correction? China is already back in a bear market...most of Europe is almost there...I'm predicting we follow suit.

20 Comments – Post Your Own

#1) On May 25, 2010 at 12:10 AM, dwot (29.03) wrote:

I never saw any foundation for the rally...

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#2) On May 25, 2010 at 12:19 AM, JGus (28.15) wrote:

dwot - I'm with you. I remember you saying back in the fall of '08 that you would begin to be interested in getting back in to the market when it was in the 700's. If I'm not mistaken, you did not jump back in when it breached 700. I'm guessing that's because you saw a lot of what I (and many others) were seeing. We've still got a long way to go to get out of this mess! I, for one, believe we retest those March '09 lows.

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#3) On May 25, 2010 at 12:24 AM, awallejr (28.17) wrote:

Oh come on.  Retesting the March '09 lows? I could only wish so I could pile back in. 

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#4) On May 25, 2010 at 12:26 AM, topsecret09 (91.09) wrote:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=351989&t=01009917921919779399

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#5) On May 25, 2010 at 12:31 AM, JGus (28.15) wrote:

awallejr - I honestly think you'll get your chance. I'll be the first to say that I could obviously be very wrong (I have been wrong for a good part of the last year as the market continued its meteoric rise - though I did lose some $ by shorting too early, I was fortunate because I always had tight stops and spent most of my time sitting in cash and physical precious metals for most of it). I just think the world financial system is VERY, VERY broken and the effect that governments can have on it is GREATLY diminishing. Just look at the $1 Trillion bailout in Europe - all it bought us was a one day explosive rally and the very next week we broke through the lows of the flash crash. We've already chewed up several months worth of gains and we're only 1 month into this 'correction'.

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#6) On May 25, 2010 at 12:36 AM, JGus (28.15) wrote:

topsecret09 - Nice call! For fun, I created a new player in mid-April - ItsGonnaBlow. That pretty much sums up where I think the market is headed.

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#7) On May 25, 2010 at 12:55 AM, awallejr (28.17) wrote:

Well you might want to look at a bunch of dividend yielders.  These companies paid dividends throughout the '08-'09 crash and no reason to think they won't continue to do so.  A bunch I can think of off the top of my head:  MMLP, PVR, EVEP, AGNC, PSEC, AB, HTGC, JPS, BBEP, ARCC, MWP.  You can get that 1-2% in the bank, or 5-10 times or more than that if you have the stomach for the churn.

Man I sure wish I could buy DOW at $6 again, or C at $1, or BAC at $3, or MTL at $3.  It just ain't happening.  The market needed to correct.  The only question is to what degree, but there has been too much paper printing and low rate accomodation and true long term commodities demand (emerging economies still want the stuff), to expect a revisit of March '09.

 

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#8) On May 25, 2010 at 12:58 AM, dibble905 (< 20) wrote:

China's major issue has been government intervention to slow the economy down and yuan appreciation. Now, we see the "slow down" becoming a much more natural phenomenon for China given the European financial crisis. In that sense, government intervention has abaite.

China is in a bear market from an equity standpoint. Over a year ago, their equity market had priced in fairly lofty expectations -- albeit less than in 2007. But, at the same time, with strong growth still expected for the Chinese economy over this year and the next, I would not be surprised if it reverses course sooner rather than later.

As for Europe and the United States? Given that Europe has in fact put in a financial catastrophy prevention mechanism versus the US financial catastrophy reaction mechanism, I would put them ahead of the curve. The main issue is the EU's unity and how long this will drag on before it starts impacting economic growth in much greater ways -- as, to this date, the effects should be quite minimal.

People are already beginning to price in catastrophy much like in March 2009 after the big Lehman incident in 2008. If the catastrophe doesn't come, I would also not be surprised to see a second replay of the rally.

Given that Europe's concern is mainly "structural" or long-term in nature, I actually do not expect this financial crisis concern to last forever -- in fact, unless something negative happens soon, I would almost bet on a huge rally as corporate earnings round 2 for 2010 start their way in.

By July, we'll know what direction we will be going in for at least the medium term.

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#9) On May 25, 2010 at 12:58 AM, awallejr (28.17) wrote:

Can't edit but BBEP did suspend its dividend for a couple quarters, but that was more as a result of its fued with a major shareholder I suspect (putting pressure on them to settle which they ultimately did).

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#10) On May 25, 2010 at 12:59 AM, awallejr (28.17) wrote:

feud ;p

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#11) On May 25, 2010 at 4:08 AM, JGus (28.15) wrote:

Update - now down over 27!

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#12) On May 25, 2010 at 5:23 AM, JGus (28.15) wrote:

At this pace, we may be tripping some circuit breakers today. All major foreign markets down big tonight. Of course, you never can tell what the PPT might do to try and stop this free-fall :)

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#13) On May 25, 2010 at 6:17 AM, JGus (28.15) wrote:

Update - now down 32+ and has been down as much as 34! It's hard to believe that we're down twice as far now as we were when I wrote this post. Anyone willing to step in front of this runaway train?

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#14) On May 25, 2010 at 6:19 AM, JGus (28.15) wrote:

Every major foreign market now down over 3% with the CAC down over 4%. Sounds like the 'point of recognition' to me!

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#15) On May 25, 2010 at 6:21 AM, JGus (28.15) wrote:

awallejr  - Just curious, how long do you think the correction will last? Are you buying yet?

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#16) On May 25, 2010 at 7:19 AM, sentinelbrit (54.87) wrote:

The market will find a bottom once the ECB announces quantitative easing.

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#17) On May 25, 2010 at 7:39 AM, awallejr (28.17) wrote:

Yup been buying select dividend stocks.  TOT for one.  MMLP. PVR and AGNC.  AGNC I have to keep an eye on in the future since it is interest rate sensitive but I take the FED's meaning "extended period of time" to mean years, not months like many think.

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#18) On May 25, 2010 at 8:39 AM, MoneyWorksforMe (< 20) wrote:

"Given that Europe's concern is mainly "structural" or long-term in nature, I actually do not expect this financial crisis concern to last forever -- in fact, unless something negative happens soon, I would almost bet on a huge rally as corporate earnings round 2 for 2010 start their way in.

By July, we'll know what direction we will be going in for at least the medium term."

But should not the concern be that after an excellent quarter earnings wise in the US, with many analysts and corporations pushing up forecasts and expectations --BEFORE the serious economic decline in both China and the EU really took shape--that we are primed for significant, broad misses in Q2? I think the next set of earnings is more likely to add to the downward pressure.

The US equity rally has depended immensely on exports, and now with a decline in the value of the euro coupled with more pessimistic consumers, sales are set for a large decline. The precipitous decline in China's growth is another serious concern. 

True, many domestic companies now look attractive from a valuation standpoint, but it is extremely difficult to gauge the negative affects all these recent events will have on any particular company's performance. 

The only bullish aspect for US equities is there is simply no where to put your money to work, interests rates are virtually zero, and international equities have been performing even worse. I think this inclines more people to look to US equities than they otherwise would despite of all the risks. I personally think much of this money will continue to flow into hard assets such as gold and silver to combat the debasing of currency, but that's just me. 

At this point I would bet on a double dip recession rather than just a correction. I could very well be wrong, however, I much rather err by being too defensive during this tumultuous period. Expectations will have to come down before I see a good buying opportunity again. 

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#19) On May 25, 2010 at 9:08 AM, JGus (28.15) wrote:

Remember when it was pretty common to wake up to futures markets like this in late '08-early '09? What's that saying...History doesn't repeat itself, but it sure does rhyme. The second (and larger) leg down in the great depression also started with European debt issues if I remember correctly.

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#20) On May 25, 2010 at 12:05 PM, dwot (29.03) wrote:

JGus, I said I would start looking in that range.  It started to rally right when I was interested in looking.  I don't chase a market, especially one with so many problems.

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