Monday, December 28, 2009, 4:35PM ET - U.S. Markets Closed.

More Short-Term Gains Likely, But Harrison Sees 5 Reasons for Caution Ahead

Posted Apr 30, 2009 11:50am EDT by Aaron Task in Investing, Recession, Biotech
Thursday's rally has the S&P 500 solidly above 875, a key level many traders have been watching. This technical "breakout" could propel the S&P toward 1000, says Todd Harrison CEO of Minyanville.com, confirming the "monster move" forecast he made here in early February.

While short-term bullish, Harrison is cautious above what lies just beyond the immediate horizon, citing the following five reasons here and in the accompanying video:

  • Pop and drop: The 875 "breakout" rally could be the final phase of the rally, rather than the start of a new leg. Harrison believes the stock market will be W-shaped in 2009 and that we're approaching the middle peak of the W.
  • Swine Flu: The World Bank estimates an influenza pandemic could cost $3 trillion, reduce global GDP by 5% and cause 70 million deaths worldwide. Harrison believes the market is being too complacent about this potential impact, and totally oblivious to the possibility (however remote) this outbreak was the result of bio-terrorism.
  • Pakistan: The Pakistan government is fighting back but the Taliban's advance toward Islamabad in recent week is a geopolitical risk not currently priced into the market. (On the other hand, geopolitical expert George Friedman tells Tech Ticker the war with radical Islam is effective over.)
  • Ken Lewis vs. Hank Paulson: The "he said-he said" back and forth between the former Treasury Secretary and Bank of America CEO "has massive implications for the psychology surrounding the government's role" in the capital markets, Harrison writes.
  • Bank Street Tests: Like many, Harrison believes the tests aren't stressful enough, and notes the financial system is "only a strong as its weakest link."

100 Comments

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 11:57AM EDT

S & P at 1000 ? U got to be Kidding !

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 12:00PM EDT

The flu story is meant to distract us. Stop picking bottoms, or at least wash your hands afterwards, and it won't be a problem.

mmark
mmark - Thursday April 30, 2009 12:01PM EDT

sell in may and go away? that's exactly what johnny ike has told us to do. i'm calling my edward jones advisor right now!

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 12:04PM EDT

Stop the gloom and doom. Quit trying to increase your ratings. How about telling us how to find the sound companies and investments instead of trying to increase your following. This is the last article I'm reading associated with either of you.

Michael B
Michael B - Thursday April 30, 2009 12:08PM EDT

Definitely not buying into the hype that we are in the clear. I am waiting for the correction

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 12:09PM EDT

So many "experts" have been wrong about what the market will do -- especially Aaron, who has called the recent rally a "sucker's rally" and dead-cat bounce, and even gone on record to say he wasn't getting back in anytime soon. One thing is clear, however, and that's that the market has generally started to rise 6 - 9 months before a recession ends, which would place it around the end of this year. Seems about right to me, but I'm no "expert."

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 12:10PM EDT

All you shorts and bears missed the permanent bottom in March. You've already missed a huge move up. We are climbing a "wall of worry" and long-term investors will profit greatly over the next 5-10 years (especially in materials and energy and selective small-cap funds). This market has tremendous pent-up energy to move up, despite bad news that normally would cause the market to correct. Those who are waiting for a huge pull-back to "get back in" will be terribly disappointed. Us older investors who've been involved in the markets since the 70's know that the markets will climb a lot more and then plateau for awhile. Day-traders and those who bet against (short) fundamentally good companies will continue to lose their shirts.

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 12:14PM EDT

So many "experts" have been wrong about what the market will do -- especially Aaron, who has called the recent rally a "sucker's rally" and dead-cat bounce, and even gone on record to say he wasn't getting back in anytime soon. One thing is clear, however, and that's that the market has generally started to rise 6 - 9 months before a recession ends, which would place it around the end of this year. Seems about right to me, but I'm no "expert."

pat
pat - Thursday April 30, 2009 12:14PM EDT

The swine flu bs is just bs. Way overblown. It's the flu and some people die from it. In Mexico you have over half a mln people per year dieing from other causes. Thousands of people die from other forms of flu every year. What is so different with this one. So far in Mexico there have been 7 CONFIRMED deaths from the Swine flu in meixico one outside.. The 100 or so others are unconfirmed but MAY be related to the Swine flu. I wish the media would give it a break, but I guess they have to have some sensational story to make money. The real loser is the Mexican economy.

PritthaB
PritthaB - Thursday April 30, 2009 12:16PM EDT

Todd Harrison has been watching too many "spy" movies. The Mexican Anthropologist was infected by Al Qaeda in order to infect President Obama with swine flu? Give me a break. Hey Todd, maybe the terrorists are behind all the volcanic eruptions and earthquakes around the world too. After all , they live subterraneanly.

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 12:18PM EDT

Aaron, I want to be frank with you. The quality of your quests is not as good as Henry's. This Harrison is a low-quality trader. His guess is slightly better than a monkey's at best. He reminds of another trader named Jon NAJARIAN. These guys live off the volatility, which means in plain English, their gains or losses are only slightly better than the market's AT BEST.

- Thursday April 30, 2009 12:23PM EDT

hype and nonsense

I'm Just saying
I'm Just saying - Thursday April 30, 2009 12:27PM EDT

Only 5? Wait until the people finally look behind the curtain...

dano
dano - Thursday April 30, 2009 12:27PM EDT

I have been very slightly long since the last week of March 2009. I agree with the commentator that this is a bear market rally. We've had massive 20%+ rallies off of the bottom in October and also off of the lower low in November of last year, all before the market went to new lower lows. I see no major difference with this time, either. The market did not have proper formations to indicate a final low was in back on 3/6 and 3/9 and I declared that that was not the final low back then. We never even had a retest of the 3/9 lows yet, either. I will be exiting my long positions and getting short with put options once I see a market failure to rally, but that has not occurred yet since we keep hitting new highs for this move. I'm not being pessimistic, only realistic.

carol
carol - Thursday April 30, 2009 12:28PM EDT

I'm afraid I only partialy agree with Johnny Ike today I do think sell in May but still see another "bottom " coming in june/july still have lots of people out of work and the three/ four month mark for foreclosers is in june / july don't think we are out of the woods yet

mmark
mmark - Thursday April 30, 2009 12:29PM EDT

i'm going to spread this rumor. obama has the swine flu and is going to die. that will surely exhaust the rally.

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 12:29PM EDT

How many swine flu deaths in the US do you think it will take before fear sets in again? 100, 200, or 1000 maybe. When we have 10,000 dead by May the DOW will test new lows. How about some commercial real estate defaults, how many trillions in bad debt do you think the taxpayers will have to pay for next? 1, 2 or 10 maybe. When BAC and C and the rest can't make a profit in Q2 no matter how much the Fed pumps in, more fear, DOW will test new lows, June? maybe August? I think this W partern will look like a string of Ws. Nobdoy missed a permanent bottom yet, plenty more to come.

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 12:29PM EDT

This is a bear market rally. Traders needed an up-leg to get folks back into the market to rip off on the way back down. Give it 30 days and we will be on the way back down. Lets look at reality: 1) Commercial and Alt-A Real Estate failures are just getting started. The Sub-Prime collapse will be nothing compared to the next wave coming. 2) American "consumers" are tapped and loaded in debt. Real Estate prices are not returning ANYTIME soon. Consumer retail spending is not coming back anytime soon. 3) The Swine FLU is really most likely a "bio-terror" event, but it came from inside the U.S. - virus samples were taken and replaced at the same military bases the weaponized antrax was stolen from and mailed around the U.S. - this is a mainstream story now. Look at medical facts: we are not in FLU season, FLUs always come from EAST TO WEST (Ie: Asia), and this is a structure that has not naturally happened in the past... too many problems with this FLU. Good reason to justify keeping people off the street (ie: protesting) due to collaspe eh? 4) The Bank Stress Tests are NONSENSE. We have already hit levels to satisfy the "alternate tougher" levels. Lets face it, the ONLY reason these banks are open anymore is because YOUR MONEY was given to them. Also, look at the accounting magic they used for Q1 results. Wait until Q2!!! I totally this is a "W" recovery. If you are going to ride this do so and make money but understand you need to be ready to GET OUT when it reverses... and it will.

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 12:29PM EDT

Hmm...we're overdue for the next leg down. I wonder if the trend will continue or we will breakout? See what I mean at www.BearMarketComparison.com.

Yahoo! Finance User
Yahoo! Finance User - Thursday April 30, 2009 12:32PM EDT

"What I do know is the Market will end up Dow Jones 18,000 in five years, No doubt about it.". That may be true, but if that happens, gas will be $20/gallon and gold will be $5,000/ounce.

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