I suppose I should do a post on what just went down today :-)
First off let me say that nothing unexpected happened today. The market has known for months that the Fed was going to buy treasuries. They've been printing trillions of dollars for a year and a half. Does another trillion really make any difference? No, there were no surprises today.
There is one thing and one thing only going on. The market is simply bouncing out of the seasonal cycle low. That's it, nothing more. The S&P was going to hit the 800 level with or without the Fed. Maybe they managed to speed up the process by a day or two but it was going to happen.
Let me assure everyone that this is not the magic bullet anymore than anything else the Fed has tried over the last 18 months. Let me also assure everyone that the bear market will not end until valuations become ridiculously cheap. According to Barrons the S&P is now trading at a P/E of 23. That's not cheap.
Secular bear markets don't end until we get into single digit P/E's. This time will be no different.
All that being said we are at the beginning of another violent bear market rally. These rallies last on average 2-3 months. The ones that bounce out of seasonal cycle lows can be very convincing.
Sadly to say this is how the bear keeps everyone hanging on for the full ride down. Trust me, almost everyone will end up taking the full ride down either because they were too stupid to get off when they had the chance (most retail investors will fall into this category) or because they tried to repeatedly pick the never ending bottom in what will eventually turn out to be either the second worst or the worst bear market in history (most sophisticated investors are going to fall into this category).
Make no mistake, by the time this is finally over there will be almost no one left standing.
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9 months ago