A quick sharp technical bear market rally exploded Tuesday. Investor411 cautioned yesterday  -”Warning to all those who are short stocks/sectors.  We are long overdue for an oversold technical rally.  A bear market rally could see a quick explosion higher in a short period of time as shorts rush to cover.”  

Breaking News from the Business World

(first some fun - I do not know the original author, but thanks for the email)

  • 1. The US has made a new weapon that destroys people but keeps the building standing. Its called the stock market.
  • 2. Do you have any idea how cheap stocks are?   Wall Street is now being called Wal-Mart Street.
  • 3. The difference between a pigeon and an investment banker. The pigeon can still make a deposit on a BMW
  • 4. What’s the difference between a guy who lost everything in Las Vegas and an investment banker?   A tie!
  • 5. The problem with investment bank balance sheet is that on the left side nothing’s right and on the right side nothing’s left.
  • 6. I want to warn people from Nigeria.  if you get any emails from Washington asking for money, it’s a scam. Don’t fall for it 
  • 7. What worries me most about the credit crunch, is that if one of my checks is returned stamped ‘insufficient funds’.  I  won’t know whether that refers to mine or the bank’s 

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A Letter to Obama

Business columnist Bob Kuttner has again hit the nail on the head for those of us who are worried that we are hearing only one message from Larry Summers and Tim Geithner on our economic problems. What going to be done with the bad assets and the 19 major US financial institutions that “controll 2/3 to 3/4 of the total (good and bad) assets out there.”(Geithner) Check out Kuttner’s “White House Confidential.”

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Transforming Capitalism

Charlie Rose conducts some of the best interviews.  Here’s Charlie with Tim Geithner.  It’s long (54 minutes) but if you want t make up your own mind about Summer’s protegee listen to the interview. Discussed in the interview is the “Stress Test” for the 19 largest banks that the government proposes is critical to you, the economy, and stocks. 

The bottom line question, as stated many times before, is who pays and how we propose to fix this mess?

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AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

Stocks

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Index Percentage % Volume
Dow +5.80% up
NASDQ +7.07% up
S&P500 +6.37% up
Russell2000 +7.13% -

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Technicals & Fundamentals

From Yesterday’s Investors411 - Warning to all those who are short stocks/sectors.  We are long overdue for an oversold technical rally.  A bear market rally could see a quick explosion higher in a short period of time as shorts rush to cover.

 A big hunk of traders who had  taken a short position over the last month(lots in those ETF’s market baskets of short positions like SDS) rushed to sell their shorts yesterday in this years mother of all technical rallies.  This could continue this morning since over the last three weeks a lot of traders took out short positions. While their was a few pieces of good news,there was nothing significant enough to warent a 5 to 7% rally.

Volume was huge on the benchmark S&P 500 and Dow.  This indicates that the rally should have some legs.

Reading the Tea Leaves - Right now, this is a classic bear market rally – Fast, quick and it will tear your heart out.  It was also perhaps the most predicted oversold bounce in years. You can only go down so many days in a row –  More shorts will cover their positions will cover today and markets could move higher.  

You could see another 5 to 7% added on technically before fundamentals kick in.  At that point, belief in the steps that the government has taken will quickly (by the end of the year) turn the recession around will have to take hold.

Technically, the  majority of the time the old lows get tested.  This is called a double bottom.  So in the next week, month or three chances are the lows will be retested (Dow 6469 low, Dow now at 6926) To make a higher high on the Dow we have to get above 9088 (See chart at right of blog) 9088 was the high created just a little over 2 months ago.  That’s a 30% to 35% gain. There is another resistance level just above 8,000. (8144)

Bottom Line for Long term InvestorsBest advise – this is a market you should be dating and not married to.  Sorry the old buy it and hold forever is just not working.  If you have a major cash position you could nibble a little.

But remember chances are the lows will get re tested.  When/if the Dow makes it up to 8,000 (see positions section of blog) it will probably be a good idea to protect any investment. Right now this looks like a bear market rally.  

Let’s see how the stock market reacts to bad news over the next week or two. If it can handle the bad new and still move higher, then there is some hope. 

 

Long Term Outlook = BEARS RULE

See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING!

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