Did the bear rally breathe its last with yesterday’s sharp reversal? We shall see. But we hesitate to call the hubris of the last ten weeks a sucker’s rally, since we do not personally know anyone who did not hate and revile it every step of the way. A “bull trap” is what the rally will come to be called if stocks now fall in the weeks and months ahead, since many who eagerly bought into it will drown as the bullish tide recedes. However, since March 6, when the rally commenced on news that Citi had actually made money, it is bears who have been trapped. It could be said in their defense that trying to pick a top in the current economic environment is an unavoidable temptation, especially with the news media conjuring up a picture of hope and recovery that any fool could tell you is a mirage.
The reporters who write these stories need only chat with their neighbors to find out what is really going on. Instead, they dutifully quote Ben Bernanke blathering about how the recession “should end” later this year. We haven’t seen any details concerning how this might occur, but the Fed chairman himself has cited the stock market’s rise as the most convincing evidence that it will. A supposed student of history, Helicopter Ben could probably benefit from poring over some stock charts from the 1930s, since the two very powerful rallies that occurred during that decade no more signaled recovery than Hitler’s invasion of Poland signaled stability for Europe.
The Hangman Cometh
In the publicly accessible Rick’s Picks forum, one technician who identified himself as “Jay” saw conclusive signs of a major reversal: “There are pretty good technical indications that the recent sucker rally topped this morning,” he wrote. “Examples: Japanese Candlestick Chart with a ‘hang man’ symbol [on Tuesday], plus a ‘key reversal bar’ to the downside today. These two are ringing the bell to alert us that a major top should be in (prices not to be seen again in a long time).”
We would agree that the bear rally was getting a bit toothsome, but we await further evidence that the short-covering frenzy has breathed its last. In the days ahead, we promise to let you know if the stake that now protrudes from the bull’s heart should evince something more than a death rattle. Stay tuned.
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{ 4 comments }
Great illustration and commentary as always. Sure, there is a possibility of another leg up to an area approaching a 5o percent retracement off the lows in stocks, but I do not see the catalyst for such an extended move. What really positive news could there be on the horizon? I think we are heading down, I’ve sold in May, and I’m going away. See you in September!
We are in an uptrend until we are not.
Still in an upward trend (barely) and the markets were bound to give some of the gains back. The next couple of days should give a more clear idea which way the markets are heading.
People bearish on the economy and markets are going to find a reason for the recent upward push to fail. Bull-tards are going to look for reasons why it won’t.
I think there is too much overhead resistance to carry us much past $95 on SPY. There’s a lot of shares in limbo at that point and I think any buying from there will be met by a wave of sellers. I suppose we’ll find out if/when we get there.
It amazes me that the OIL speculators are at it again, so soon after having their heads handed to them. With Gasoline demand at a reported 5 yr. low and OIL supplies looking for more onshore storage , you have to wonder why gas prices are rising at 20 cent leaps every other week now? Today, we also have seen food rising again as well for some unknown reason? I take all these as lagging indicators of the bear rally. All the rest of the news out here to be blunt SUCKS. So, what’s behind the kiting of the market, beyond the usual echo chamber of BS artists and con men on Wall St. and their paid for DC flunky squad?
Aloha All
We are indeed in another uptrend defying the majority of vocal market participants: A very successful headliner bear who called the first week in March a Generational Low just went short again, while Dr Gloom, Boom and Doom suggests the fall of Capitalism. And Merrill just let go their Bearish Market Analyst as they did A Gary Shilling in ‘73. Oppenheimer’s Bearish Bank Analyst went out on her own. It can be hard to go against the crowd, but profitable.
There may be more bearishness on the first pullback than at the bottom, as there may be more greed on the first rally after the top. We let the long-term market trend speak for itself.
Having traded markets for awhile, Jesse Livermore comes to mind:
I made more money sitting than thinking.
Markets can stay overbought a lot longer than people on the wrong side can afford.
Equity markets looking ahead for recovery may be a safer refuge for trillions of flight capital too large to herd into gold and silver right without totally wrecking four big banks short gold and silver 2:1 and 3:1. BDI and AFL hit new highs, up 266% and 247%. Call us a bulltard, but this trend is our friend.
Regards*Rich
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