The Bishop and the Butterfly: Murder, Politics, and the End of the Jazz Age
    Deadman's picture

    Whaddya know?? Markets go up too! ...

    I am usually the bearer of such depressing market and economic news, I have to at least give some props when there are some good things to talk about.

    According to an article yesterday in the globe and mail, the percentage of American consumers who are behind in their credit card payments fell 11% y/y in the fourth quarter, which is a bit surprising given the rising unemployment figures we've seen, but it gibes with some other consumer credit data I've seen, including the much higher 5% U.S. consumer savings rate we saw in January. Now 5% is still way down from the historical average over the past 50 years, but it's a start toward increased personal responsibility.

    Of course, increased savings doesn't bode well for near-term GDP numbers, but it is absolutely essential we curtail our credit habits if we are to restore a bit of balance in our economy and prepare for a more sustained recovery down the road.

    in terms of the market, it's a very solid day on wall street today. One thing I've noticed is that while the major indices are lower than they were last november when the market had its last crescendo panic-selling bottom, many non-financial stocks are still up since then (actually, about 40% of the S&P 500 stocks are selling at higher prices now, according to an article on RealMoney which alerted me to the Globe and Mail story). That's what is known as a positive divergence (when an index has moved to a new low, but most of the component stocks are trading higher) and could indicate that selling has exhausted itself in the near-term.

    Bottom line: I expect this overall move higher to have some legs (given the volatility of the market, I'm not about to predict how tall those legs are though). The bigger question is, have we hit the ultimate bottom? My heart - and at least a piece of my brain - wants to say yes, but my gut still says no.



    since i started writing this piece, the rally has gotten more and more impressive ... but remember, some of the biggest most dramatic rallies come during bear markets as short sellers who pressed their bets get squeezed. the increasing velocity of this ramp up actually has me doubting even more how long this can last and whether we've hit the ultimate bottom. I can't envision that this - a big V-spike move higher - will be the manner in which we see the biggest bear market of the past 70+ years end. in other words, enjoy the move while it lasts.

    I have heard the rally was due to Citi being in the black.  If that is true and Citi really isn't in the clear (as some others are saying) will the down turn exceed the rally? 

    It was a pretty significant bottom we hit on Monday. According to my chart, Dow hit bottoms of 3 channels at the same time, so it had nowhere to go but up.

    Short-term channel is going up, mid-term channel is going down, and long-term channel horizontal.

    So, my prediction: going up inside short-term channel until reaching its top, then going down until reaching mid-term and long-term bottom (which will be the double bottom around 6500 again), then the recession is over, and we are going UP!!!

    In the very short-term, we just hit 25% of both short-term and mid-term channel, so it should rebound down a little bit, before breaking the barrier.

    Wish I could attach my chart.

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