I'm sure you heard many, and will hear many more.
Let me point out a few facts:
In short there is absolutely nothing in the past history of the market to support a "bottom" call here. Remember that CNBC's mouth-breathers along with virtually every commentator called a bottom in March and then again in July. How has that worked out?
Is it possible we have bottomed here? Sure. Anything is possible. I could win the lotto this coming weekend, if I buy a ticket.
But hope is not an investment strategy and there is a difference between trading a bear market rally (and, if we have in fact finished (III) down, we're due for one that might last a couple of months) and investing for the long term.
If this bear is not over, then the 13/34 EMA and 20/50 SMA (on a weekly chart) will not cross back over. If you are a conservative investor you should have gone to cash in December of 2007 at the latest.
If you did not and are now paying attention to the bottom callers you are engaged in "investment by prayer", which is a horrible strategy and has been the ruin of many people in the market.
If you did go to cash back in 2007 based on a long-term timing signal and are now engaged in going back into the market "long", one has to ask - why would you be doing that when those same long-term timing signals are in fact still diverging - that is, showing deteriorating rather than improving conditions?
Finally, analyze your investment thesis based on what you think the economy is going to do. If you can come up with a cogent belief that the economy - the consumer portion of the economy - will in fact turn around by June of 2009, then you have an argument for trying to scale into investment positions for the long haul at this time.
Personally, I don't see it.
Yesterday's rally was an abberation that was kicked off by massive intervention in the Yen, whether the Bank of Japan admits it or not. That chart action was not natural and did not occur on its own.
Neither was the action in VW and the DAX. People ought to go to prison for that stunt. Of course they won't because "it made prices go up", but in my opinion what happened with Porsche and VW, along with the various banks involved, is nothing short of a criminal conspiracy and everyone involved in that should be getting a 20 year date with Bubba. The DAX is heavily-correlated with our markets (always has been - look at some charts) and when it closed out with all those hedgies facing an angry margin clerk they came over here and bought paper like nobody's business. I was listening to the pit audio feed today and magically there were large paper buyers who suddenly showed up shortly after Europe closed. Once the daily range was broken that was all it took as there were a lot of people caught offsides who were forced to cover and whammo - up goes the stock market like a rocket ship.
Coincidence? I think not.
Sustainable? A sign of a bottom?
Like hell - panic'd short-covering isn't a sign of anything except panic, and bull markets are marked by the absence of panic - they're euphoric events if anything - the opposite of panic.
Further, there is a cogent argument that a good part of this move was driven by technical rebalancing of so-called "balanced funds"; the moves in both bonds and stocks in the last month has required a quarterly rebalancing that would force buying of stocks and selling of bonds in fairly significant amounts due to the violence of the move. I suspect these funds were trying to scale these moves, but when that violent spike began yesterday this materially added to the panic factor, as the managers suddenly saw the potential for +2000 on the DOW over a couple of days - and their horizon, at this point, expires Friday. That will stand your hair up when you need to move several billion dollars and the last thing you want to do is buy the top on the last day!
If you bought this rally in a mutual fund or otherwise I predict you're going to be crying in your beer within days to weeks. The FOMC rate decision is today and then we have GDP on Thursday, with the latter virtually guaranteed to suck. Either or both of those could easily erase those gains as fast as they went on, with interest, and if that happens you will hear lots of wailing and gnashing of teeth. I remind you that on the 13th of October a similar spike higher occurred and the ensuing couple of weeks were not good for your account balance if you bought that rally, never mind that it appeared in the morning that we were going to get the mother and father of all follow-throughs.
I see the following on the horizon for the consumer portion of the economy and the stock market:
I will believe we will see a sustainable recovery in the stock market when I see Ben Bernanke hung by his toenails outside the Federal Reserve, Henry Paulson in the stocks being pelted with rotten tomatoes served by angry citizens, and the bankers and other institutions who have lied about their solvency either out of business or behind bars - all of them.
Absent that I believe we are at best headed for a Japan-style scenario, and at worst, a Greater Depression.
Oh, and if the government wanted to "stimulate lending", it could have set up a Federal Bank of The United States with that $700 billion (or a bunch of banks to provide competition) and created $7 trillion in new credit, while allowing all the existing banks who made bad bets to twist on their own rope until dead. They didn't, which tells you immediately that actually improving lending conditions into the real economy was not their intention - the EESA was in fact designed by Paulson and Bernanke to rip you off and by doing so has and will materially prolong the economic misery we are in today.
You do what you want with your money.
I have no intention of losing mine.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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