Traders Ponder ... To Buy or Not?
To buy or not? That's the question facing traders today. Note that while financials are strong, the rest of the market is quite erratic. Only 4 of the 10 S&P sectors are up. That's due to questions about the global economy and earnings.
As examples, we saw three well-known companies gave lower earnings guidance today: Pepsi , Ingersoll-Rand , and Supervalu .
Simply put, the fear is that earnings are going to put a cap on how much the market can realistically rally.
That's not preventing the bulls from being optimistic, particularly in financials. Citigroup upgraded all the banks to "Buy," calling the new plan a "deal changer."
In general the bulls are arguing:
1) That the trend is now changing to a slow drift up
2) That the mentality is changing from "sell the rally" to "buy the dips"
3) That the system is being flooded with money and it's best not to play against that trend.
The bears are arguing:
1) Things will get worse
2) We haven't seen the cycle lows, even if this is an interim low
3) There is much more deleveraging to come.
As for the all-in argument, that traders must go all-in now because they are down for the year and have little choice, there is much debate about that.
Most traders argue that if you are down 20 percent for the year, for example, the responsible thing to do is roll up and go to cash. Doing anything else is irresponsible.
But there are plenty of risk takers out there.
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