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Good omens for markets

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by Peter Switzer

If a correction is coming it won’t happen today but I do worry when everyone is going bullish. Of course, it doesn’t change my long-term view but it means for my clients and readers who are short-term players, I’m obligated to share my here and now feelings.

In fact, I believe the excessive positive momentum in the market could easily swamp good reasons for a pullback but eventually a left-field event, like an Israel-Iran stand off, is bound to create a correction of sorts. The tricky bit is when.

Rising markets

Let me run through some recent stories that say the market heads up.

First, Laszlo Birinyi Jr., president and founder of Birinyi Associates and a famous head of equities from Salomon Brothers thinks the S&P 500 will go up by 60 per cent by 2013!

He thinks the big start to this bull market augurs well for the future. He looks at market activity and historical market patterns to make his calls.

“Looking at the market’s history, which we found to be a useful guide in the past and has been a useful guide for the last two years, we’re going to continue to dance with who ‘brung’ us,” he told CNBC.

Simply put he doesn’t see this bull market being deserted by those who are now ‘dancing’ with it.

Meanwhile, JPMorgan Chase has the big thumbs up from Wall Street analysts over all US banks with 85 per cent expecting it to outperform the S&P 500 index.

And CNBC says Credit Suisse thinks the stock will go up by 25 per cent this year! This couldn’t happen in an overall market that heads down this year. I take this as another good omen for being in the market.

Stocks overnight

Overnight the S&P 500 index was higher than double the lowest low of the GFC Crash on 6 March 2009 despite talk of Iran sending warships through the Suez Canal, which pushed up the price of oil.

If the market can go up on that sort of spooking, I reckon there are lots of new players in the market who might come and go short-term but they are in for 2011, definitely, and probably 2012.

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Published on: Thursday, February 17, 2011