Thursday, February 9, 2012

Everybody Loves Stock Market.

This week The “Three Wise Men” have arrived in the market proclaiming their love for the stock market. These wise men came in the form of:

1.       Larry Fink, head of Blackrock.
2.       Nouriel Roubini  better known as Dr. Doom and
3.       Individual Investor in the form of weekly AAII Sentiment Survey.

Fink says everyone should buy equity.  This means he is selling. Roubini turned little bullish which is reminiscent of last year’s capitulation of another perma-bear.

The third wise man, individual investor became ultra bullish, with the net AAII bullish reading at well over 30%. According to BTIG this reading has reached or exceeded 30 only five times in the last five years. And four out of five times the market dipped. Look at the following chart.

So instead of going over various technical indicators screaming danger let me again highlight two primal factors of the market. Greed and Fear. Right now there is no fear in the market and 1400 in SPX is just in front of our eyes. May be something beyond. Just because we cannot see the danger, does not mean there is no danger.  If you are convinced that everything is fixed and there is no risk of losing money, then maybe it is OK to get long. For my part, I am staying on the sideline. There will not be any “Gift of the Magi”.

P.S: As a show love, the insiders are selling like never before;