S&P Breakout

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machinehead's picture
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
S&P Breakout

This morning the S&P 500 index broke out to its highest level since early October 2008. A new 52-week high, in other words.

Of course, this is a natural consequence of Benny Bubbles' ZIRP (Zero Interest Rate Policy). When folks can't make a thin dime the honest way, in safe fixed-income securities, then they go to speculatin'

Precious metals and stocks are linked at the hip these days. So the S&P, gold and silver are tearing round the greyhound track, baying like hyenas as their flying paws kick up clods of dirty dirt.

It is not inconceivable that Bubble III will push the S&P to a retest of its previous 2007 record high, at around 1,560. It has nothing whatsoever to do with investment merit -- stocks are already overvalued. We're talking about flipping on the afterburners of a mil-jet when you're stoned crazy on crack. 'Free money' deranges rational minds more comprehensively than the siren song of drugs ever could do.

Arf, arf, arf, arf,


JAG's picture
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Re: S&P Breakout
machinehead wrote:

It is not inconceivable that Bubble III will push the S&P to a retest of its previous 2007 record high, at around 1,560. 


I have to admit that I'm starting to capitulate to your Bubble III view. Of course, thats not a good sign for your forecast because as of late, I've been the leader of the dumb money crowd, LOL.

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: S&P Breakout

The SPX did breakout in the morning, but right now it is looking weak. This is not simply a retest of what used to be resistance. While I think there is a very good possibility the SPX could be on the way to much higher highs, right now we appear to be in a trading range for the past couple weeks. I'd like to see a close or two above the resistance before I am convinced.

Subprime JD's picture
Subprime JD
Status: Platinum Member (Offline)
Joined: Feb 17 2009
Posts: 562
Re: S&P Breakout

1560 will not be reached in this environment. That is the talk of capitulation when the bears have become completely disheartened after seeing their investment thesis get blown out of the water by the 60% move in the SPX. Do realize that this economy is busted and will remain so for the next decade, if not longer.

In the end, the determining factor as to where stocks will go will be the battle of bonds vs stocks. Bernanke will sacrifice equities in a heartbeat in order to keep the US Treasury market afloat. Im sure you all read CM's latest post "adjustable rate nation". That post will remain one of his classics as it shows the greatest danger facing the capital markets. 1.5 trillion must be rolled over by March 2010, in addition to the new debt issuance. Money will have to flow into Treasury market so that the biggest and most important borrower of all (the US Gov) can stay afloat. Ben will surely sacrifice the equity markets when the US Gov needs the money. At the same, Bernanke must take into account the concerns of foreign creditors as they dont want to see their dollar holdings vanish into thin air.

Three competing interests: equity holders, US gov, creditors.

Order of importance: US Gov, creditors, equity holders.



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