Market Looks Priced for Earnings Perfection

 | Oct 17, 2011 | 3:52 PM EDT  | Comments
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When we are this overbought, even as everything is suddenly considered to be hitting on all cylinders, it is important to remember that a few weeks ago we were like-mindedly oversold, and nothing was hitting on all cylinders, and we began this impressive rally.

Yep, everything has to go right to keep going higher when you come in this overbought, just like everything has to come in simply horribly when we are that oversold, and in each iteration we didn't get the news the bulls wanted or what the bears wanted.

Are we now doomed to fall as hard as we rallied?

That has certainly been the pattern. Can better earnings trump the bears' savage decree? Probably not, because once the pendulum starts to swing the other way, you get a real momentum.

My take is that unless it turns out that German Chancellor Angela Merkel says, "It is a do-over, I was too negative about the time frame of a deal," the object has been set in motion, and it will remain in this motion until someone important from Europe recognizes, once again, that the world hangs in the balance and that only they can fix it.

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