I am really excited to be a day trader based on what lies ahead. Markets will balance some time, trend some time, chop sometime and we will put on trades based on what's on hand. No need to worry about if and when fed will
increase rates, what geometric cycle markets are in, which Fib. ratios will get hit and on and on. We will SIMPLY trade based on collective judgement of market participants of the day we are trading.
MARKET GURU: The Conditions Are Set For A 'Veritable Explosion' In M&A That Sends Stocks To 'True Bubble Levels'
"Jeremy Grantham has published his latest quarterly letter to GMO clients.
In it, he continues to deliver his message of caution, warning that the stock market is expensive and is priced to deliver paltry returns for years to come.
And he continues warn that we are heading for a bubble.
"[M]y recent forecast of a fully-fledged bubble, our definition of which requires at least 2250 on the S&P, remains in effect," he reiterated.
In this letter, Grantham commits some time addressing the current M&A boom that we have been witnessing this year.
He actually believes the next leg of this boom could be a truly historic one.
"Don’t tell me there are already a lot of deals," he writes. "I am talking about a veritable explosion, to levels never seen before."
He gives reasons why he predicts this:
1) Cheap debt: "...when compared to other deal frenzies, the real cost of debt this cycle is lower..."
2) High profit margins: "...profit margins are, despite the first quarter, still at very high levels and are widely expected to stay there..."
3) Young-looking recovery: "...the economy, despite its being in year six of an economic recovery, still looks in many ways like quite a young economy..." Grantham notes that there is slack in the labor market and room for capital spending.
"If I were a potential deal maker I would be licking my lips at an economy that seems to have enough slack to keep going for a few years," he writes.
Grantham, also observes that investors are "just now picking up their courage" after getting crushed in the last crash. Furthermore, the low interest rate environment has forced companies to find new ways to offer growth.
"I think it is likely (better than 50/50) that all previous deal records will be broken in the next year or two," he writes. "This of course will help push the market up to true bubble levels, where it will once again become very dangerous indeed."
So, there you have it. Grantham is forecasting that this bubble could be the one marked by M&A."
Read the whole letter at GMO.com.
Last edited by mfbreakout; July 19th, 2014 at 04:41 PM.
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MFB- do u ever look at a shorter time frame open (especially in the indices). I like the break out of the 2 min OR most days in the indices. trading the breakout of 15 min or 20 min OR seems a lot trickier though.
The Market is Smarter than You Are
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Good to see you around. Couple of points regarding shorter time frame OR.
1) Any type of index like YM, TF , ES etc are the worst trading instruements for trading breakouts especially shorter time frame OR. For me the bar is very high if i am goining to take a trade based off 2 minutes OR. I do have 2 minutes OR on my charts in case conditions for 2 minutes OR are met. But those conditions do not come across very often.
Typically some catalyst need to be present to take a trade right at the open.
2) For TF i use 20 minutes OR not for breakouts but reversion to the mean type of set ups.
3) Regardless of OR time period, market internals are the key. If market internals were -ve this morning, i would
have shorted ( like during yesterday NY open). But they were +ve. Thus long made sense off failed A down set up. For me these OR do not get formed by accident. They provide context and some common sense based trades.
NOTE: I covered my longs but no shorts for me due to very +ve market internals. Under such circumstances if i am going to take a short ATR need to be expanded. Higher it goes - better the odds of some decent points on shorts for reversion to the mean type of set up.
Last edited by mfbreakout; July 22nd, 2014 at 11:29 AM.
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