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Wall Street Animal Spirits are awakened by Hedge Fund Titan, David Tepper
September 25, 2010
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“Animal spirits” were awakened in Wall Street today with all major indexes up across the board. The S&P 500 closed up +2.12% to 1,148.67; the DOW up +1.86% to 10,860.26; and NASDAQ up +2.33% to 2,381.22. The DOW and the S&P 500 posted a historical gain for the September month since 1939. One should give credits to Hedge Fund titan, David Tepper, the founder of Appaloosa Management for today amazing rally. Tepper, the legendary hedge fund manager has made a “major bullish call” for the market on Friday.
Seldom, one can move the market, but today is the exception to the rule because Tepper is not an average hedge fund manager. He is the legendary who has made a monster-return of 133% in 2009; that is a cool $7.5 billions in profit for the fund and $2.5 billions for himself in the same year. His track record is as impressive as it can be, a 40% average return for himself and 30% for his private clients in 17 long years. Tepper said on Friday that he is very bullish in the U.S. equities market and he will be 99-100% fully invested if the S&P takes a pull back to 1,100. “Stocks will do well, bonds will not do as well as economy improves. If the FED does more quantitative easing, everything will do well and we have added more equities to our portfolios recently. Sometimes it is just that easy and you can’t not be that negative. My animal spirit is awakened now,” said the hedge fund titan. Investors’ sentiment was lifted after the legendary hedge fund manager’s comment, sending stocks closed at four months high across the board.
Market participants also believed that today upbeat macro economic data have helped to fuel the rally. August durable goods was encouraging; ex-transportation durable goods was up +2% versus it was down -2.8% in July. Unexpected rise in German business sentiment did also help the European market and the U.S. market in general. The Munich-based Ifo Institute reported a reading of 106.8 from 106.7 for the September month. This is surprisingly bullish as economists’ expectation was a decline to 106.5.
Technically, the S&P 500 showed a confirmed “Triple Top Break Out”, above June high, July high and September high. Next key resistance is 1,150; if this level is taken out, we would see program buying and more institutional participants. Next probable targets for the S&P 500 are 1,160 and May high at 1,170. Fund managers are likely to chase this rally into Q4-2010 for so many reasons. Midterm election historically is a positive catalyst for the market, with an average return of 17% for the S&P. Earning season is coming in October. In the last earning season, 75% of the S&P 500 reported a higher-than-expected numbers. Lastly, performance pressure would likely accelerate, causing the “sitting on the side-line money” to move into the equities market. We might experience another highly volatile market, but a year end rally is very probable. Supports for the S&P are 1,130, the 200d-MA at 1,107.54, and the psychological level at 1,100.
Best regards to all, and good luck in your trading.
Disclosure: No positions in stocks mentioned at the time of writing.