BEHIND THE MONEY: Technicals vs. Fundamentals Battle Heating Up
For many investors these days, their eyes say yes, but their stomachs say no. Despite tepid outlooks and continued signs of stagnation across many sectors, there were more than 170 new 52-week highs at the NYSE on Wednesday, the most since October 2007. The field of technical analysis is showing breakout after breakout, while fundamental analysis is still giving investors pause.
An extreme example of this dichotomy is the Dow Jones U.S. Real Estate iShares , a barometer for commercial real estate containing the biggest REITS. The ETF "broke out from a triangle formation last week," wrote Katie Stockton, MKM Partners chief market technician and frequent Fast Money guest, in a note to clients yesterday. "The breakout is a bullish development that yields a target of $50.25."
Could there be a sector with a worse reputation than commercial real estate right now? New York real estate king Richard LeFrak said on Squawk Box on Tuesday that for the first time in 15 years, he has no construction taking place right now. Yesterday, the Federal Reserve began to undertake a review of regional banks' exposure to commercial real estate on concern of deepening losses in the area.
Take the overall market. The S&P 500 continues to break through key resistance levels to fresh 11-month highs and the Dow Jones Industrial Average is marching back toward 10,000. Yet, last night David Rosenberg, one of the most respected economists and strategists out there, pointed out that the S&P 500 is up almost 60 percent from the lows, but there is no way we will see profits improve by 60 percent.
So who will be right in the end, the technical analysts or the fundamental analysts? I think someone said one time, "technical analysis works, until it doesn't." And Rosenberg of Gluskin, Sheff & Associates may have said it best last night on the show, "These rallies should be rented and not owned."
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Trader disclosure: On Sept. 17, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AA), (F), (BAC), (EEM), (FXI), (SBUX), (VIP); Seymour's Firm Owns (MTL); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman Owns (PDE); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC); Finerman Owns (WFC) Preferred Shares; Finerman Owns (RIG) ; Finerman's Firm Owns (WMT), (RIG), (MSFT), (NOK), (PBR), (PDE), (TGT); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (IYR); Najarian Owns (AAPL) & Short (AAPL) Calls; Najarian Owns (ACI) Call Spread; Najarian Owns (BAC) & Short (BAC) Calls; Najarian OWns (C) Calls; Najarian Owns (CUX); Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls; Najarian Owns (GE) Calls; Najarian Owns (JPM) & Is Short (JPM) Calls; Najarian Owns (JOYG) & Short (JOYG) Calls; Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (PALM) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA); Najarian Owns (V) & Short (V) Calls; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Calls ; Najarian Owns (WNR) Calls; Terranova Owns Gold Futures; Terranova Owns Dec Crude Contracts; Terranova Owns Dec 2010, Dec 2012 Crude Contracts; Terranova Owns (WNR) & (WNR) Calls; Terranova Owns (HOC)
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