Sideline Money Getting Scared? ~ The Risk Averse Alert

Thursday, April 16, 2009

Sideline Money Getting Scared?

Traders say money on the sidelines is getting scared — afraid to miss the boat in a market that's turning the corner. Those several trillions ... idle for months and months ... are becoming emboldened apparently because some credit spreads have been coming in, and of course the market has been going up.

Well, I rather agree with Barry Diller. There's probably more trouble ahead. And those who keep their cash safe in short-term Treasury securities apparently think so, too.


Money on the sidelines is getting scared? That's a 0.125% yield (and sinking). Hardly a picture of resurgent confidence. Quite the rush into safety today, too. Could a growing threat of commercial real estate mortgage defaults have something to do with this? How about the fact residential real estate delinquencies continue to rise?


Where's the speculative bid? Where's the volume? What are they waiting for? A pullback?

Well, that is a possibility, of course. However, I am not banking on a herd of anxious bull wannabes stampeding into the market if we do see stocks pull back.

Right now, the advance off March bottom is seen topping out. Maybe another 5% or so upside remaining. Maybe less. Just ten days of trading left until May...

Fast Money
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Greg said...

Hi Tom,

Just an idle thought this Sunday afternoon. Wondering if you happen to know anyone (website) that attempts to combine the Elliott Wave Principal, Kondratiev Cycles and Martin Armstrong calculations into a market forecast model. Would definitely be an interesting to see how all three might enhance the other.

TC said...

No, Greg, I do not. Per how all three might enhance one another, knowing the Elliott Wave Principle I fathom how the other two could help isolate finite Elliott possibilities. Then again, there are a number of ways to do this, which more or less is an exercise I engage here without spending much time at all promoting any given Elliott Wave viewpoint.

Here is something to think about, and we see this most poignantly right now. Quite simply, it is how time plays a telling part in determining future possibilities. I suppose this is a consideration you likewise are getting at in your expressed curiosity.

To put it bluntly the market is fast running out of time to soon recover much of last year's losses.

Why do I believe this? Well, first off, I think The Cramer Bull Trap summarizes my near-term position quite well. The market's underlying technical condition supports a view supposing the market is near a point where renewed selling pressure might likely develop.

This is not to say an accelerated decline likely will ensue. Rather, it is only to suggest the market might not advance much further over the next couple months or so. Supposing, then, renewed selling pressure results in a furthering of the market's ongoing sideways trend, odds are raised true bear market bottom has not yet been reached. The possibility of a further devastating decline remains all the more credible.

Had the market already strongly recovered much of last year's losses this possibility, indeed, would be diminished. Rather, now, risk of further deep losses appears heightened.

Thus, evaluating the market's present technical condition in the context of a credible and very negative intermediate-term possibility, the fact that barely any of last year's losses have thus far been recovered vividly demonstrates how this time "lost" since last November's bottom might prove very problematic for the bullish faithful, because seen from a fundamental perspective it confirms the seriousness of the macro financial situation. In other words, last year's thrashing likely was not a case of irrational fear. Were it, the market might have recovered much more than it has.

My only summarizing remark would be that, no matter what combination of analytical tools one uses, the need for reassessment is ever-present. Indeed, this applies equally to everything I just stated above.