View Full Version : SP 500 will drop below Sept 21 low

05-04-2002, 03:29 AM
Within 2 months. It's going to be brutal...unless you're shorting.

05-06-2002, 05:19 AM
why? and I am not arguing but some reason would be nice. is this based purely on chart action or economic data/news? your survey?

05-06-2002, 09:52 PM
Well...I think cooler heads prevailed after the 9/11 attacks. Though the human cost was huge the effect on the economy was temporary and more shallow than people thought at the time. Beyond airlines and hotels/tourism I can't think of many industries that were hard hit for an appreciable amount of time.

There is no reason to think the 9/21 level is a true support level. In fact, you'll see on an SP500 chart that it's basically the same support level as the aftermath of the Long Term Capital Management/Russia crisis. Those lows were caused by panic over something a more efficient market would have almost glossed over. I think this time people will be horrified to realize this downturn is due to prospects of a truly weakening economy rather than panic induced by some overhyped catastrophe.

05-08-2002, 04:17 AM
When are we going to see this weak economy? I don't see it coming at all. Only risk I see is inflationary concerns as a result of a weakening dollar. Weak economy is highly unlikely though, there is no base inflation worries (outside of import inflation) and an incredibly strong and diverse business economy here. The rest of the world is growing which will greatly increase our exports very shortly. In fact I think that might be the huge surprise of this all. American products might not be terribly competitive due to the FX, but the cachet the American names and quality in services have is unbeatable and will drive a strong export surge soon due to the more favorable FX that the market seems to be demanding right now. The US economy succeeds because of a far superior work-force in structure and capital, that advantage won't go away anytime soon.

As for S&P prices, it might go a little lower, but I sense a reversal coming not too far away. So many bears have come out of the woodwork that the standard rally to clean out the shorts could be on its way when you least expect it.

05-08-2002, 06:37 AM
I thought a recession was two consecutive negative quarters of GDP growth. Haven't seen it yet. There is a capital spending depression but it's only one component of GDP and I'm sure that we've seen the trough in it too. I agree with you about the the economic risks. The dollar was so strong for so long that I don't find the current decline that troublesome. That means watch the price of the dollar vs. the yen and vs. the euro very closely.

05-08-2002, 06:44 AM
A bet on a weakening economy is a bet in my mind on a weakening consummer. With all of the investment guru's that I see recommending companies that derive revenues from consummer spending perhaps there is something to be said for a weakening consummer.

05-09-2002, 01:49 AM
How can the consumer weaken that much when productivity and incomes are going through the roof? The worries about unemployment are there, but unemployment is such a backward looking issue that I find it hard to imagine consumers getting tight more than they stand right now.

My reasoning to avoid S&P's goes beyond economic concerns though. I see the S&P's drop being a strong reflection of a lot of negative bias. Maybe its good, maybe its bad, but I see a big short squeeze on all this negative bias coming. So many analysts are saying sell S&P or move to other sectors that a lot of the downward pressure is almost certain to come with shorts. Those shorts invariably get hammered with an explosive day like you saw today. That is the reason I have never shorted a market as a whole index. There is just way too much positive bias always hanging around in the form of retirement funds so it takes a lot of negative sentiment and shorts to drive it down enough to make a good return. Eventually though those shorts get anxious because breakouts get easy to accomplish just on the shorts taking their profits and exiting all at once. I think that had to be part of today's move. In the end its one thing to stay wary of an index and maybe avoid putting your money in it, but in general I think its a ticking bomb to actually go out and short it. Short certain stocks, that can be a good strategy, but shorting an index where money is usually flowing in a lot more than its flowing out and you are taking big risks. Just my opinion for the less than active traders...