Recovery or Dead Cat Bounce?

[nomore4s]

I simply do not know how this market can turn around and form a new bull market when there is still so much more bad news economically to come.

Why does it have to be a new bull market? Why can't we just go sideways for awhile?

IMO we will trade sideways for an extended period when a bottom is made, I can't see a new bull kicking off without a solid base.

 

[MrBurns]

Why does it have to be a new bull market? Why can't we just go sideways for awhile?

IMO we will trade sideways for an extended period when a bottom is made, I can't see a new bull kicking off without a solid base.

I still say the only reason the market holds any interest for anybody is that cash has no where else to go, for now..........

So they put it in get scared take it out and thats what we're seeing now, if the banks were paying anything near reasonable interest rates the share market would collapse overnight.

 

[GumbyLearner]

Yes this is very true. Retracement levels are common and this bounce could push up by 38%, 50% or 62%. The reaction at the level of resistence of ~3800 as I said previously is going to determine how high this retracement will go. A slow zig zag drop down will be a bullish signal that this bounce has more to go.

It doesn't mean it is not apart of a more longer term down trend that I believe we are in. I simply do not know how this market can turn around and form a new bull market when there is still so much more bad news economically to come. We must not forget that during the great depression markets rallied some 50% in 1930 before dropping another 90% in 1932. History is your friend.

Remeber that the stock market is not the economy and does not provide a reliable forecasting tool of what is to come economically. We are headed into a debt tsunami that is really unheard of in history. The charts show it and the facts show it. The global economy is in trouble either way (through inflation or bankruptcies, this is the only way out of this mess, unless we just prolong the debt dubble and we will face the same problems again in say 5 yrs time). Economically we are really quite stuffed.

Having said that, the market is obviously still tradable. The economy is not the stock market. You must take advantage of oversold rallies like this one before the next downtrend. Buy and hold is going to be hard over the next few years, trading I think is more favourable. wonder.

Certainly some food for thought there wonderr.
I'm still inclined to stick with the bears.

From a historical context, it's not like the current economic environment can replicate the New Deal actions of the 1930's as easily. The resources just are no where near as abundant as back then. The refitting of energy efficient technology such as light-bulbs in US Government buildings just don't seem to convince me as a solution to this crisis. Especially when compared to the mass man-power keynesian economic programs of FDR when resources were abundant AND cheap mind you. At the same time you will have figures skewed about the environmental maximum sustainability yield and whether it's an empirical economic argument or a biological one.

Governments are short-termers these days and I don't think there are as many cheaply accessable resources to fill the void of the pending OTC derivative collapse and quantative easing policy. Inflation should help when it arrives though.

 

[wonderrman]

Why does it have to be a new bull market? Why can't we just go sideways for awhile?

IMO we will trade sideways for an extended period when a bottom is made, I can't see a new bull kicking off without a solid base.

I was responding to the previous posters who had suggested a new bull. I've said many many times that sidewaves action can occur and this is a bullish signal that the market is preparing to push higher.

I do not know if you have read many of my previous posts but I have said it on many occasions. I will post the diagrams again as possible reactions when we hit the resistence and the market needs to take a break.



Push down, news lows. Then a base and move up.



Consolidating basing period which technically is an extremely bullish sign that markets are preparing to moveh higher.

wonder

 

[wonderrman]

I still say the only reason the market holds any interest for anybody is that cash has no where else to go, for now..........

Yes monty I agree with you. Massive money printing causes asset inflation and this creates massive volatility in all assets classes. This causes markets to rally because of excess money around in the system. Again it is short term and in the long run doesn't mean much because currency is debased because of the inflation. The US Fed has proved over the past few month that they are a money printing machine. If something goes wrong they print, if it does not fix the problem they print more. This is not healthy and it stuffs the economy. Just another scenario that could eventuate out of this current problem.

I'm still inclined to stick with the bears.

Yes I agree. Either way you can't get out of a mess like this in a good state. Either bankruptcies and depression or hyperinflation because governments will print and print more which causes the currency to debase. This does not mean you cannot trade the market and still make money.

Governments are short-termers these days and I don't think there are as many cheaply accessable resources to fill the void of the pending OTC derivative collapse and quantative easing policy.

Again I agree. Each crisis is different. But governmens don't change. The response of governments will seal our fate because they cannot learn from the past and will make the same mistakes that every politician has made before them.

People were so crazy about Obama and the 'change' he bought in. I laugh at this. Obama has bough in the same people of the past who caused this, and we expect them to fix it! What a joke. He has the same people who removed the glass segal act and the people who deregulated the markets to cause this problem in his office. It is a joke.

w

 

[moXJO]

One thing that should be mentioned is the fed is attempting to do the exact opposite of what they did during the 1930's depression. Which is one of the reasons we are seeing the massive amount of money printing. Whether this causes problems further down the track (probable) remains to be seen.

I think Ruddy took their lead. Will be interesting to see what happens to the Europe nations that did not follow

 

[wonderrman]

One thing that should be mentioned is the fed is attempting to do the exact opposite of what they did during the 1930's depression. Which is one of the reasons we are seeing the massive amount of money printing. Whether this causes problems further down the track (probable) remains to be seen.

Yes that is true but comparing our economic problems to the great depression is silly. People in the Great Depression did not have credit cards or loans off the equity of their house. I think now is much worse because our countries and people are in a lot more debt. In 1920 US debt was $25.9 billion, now it is 10,699 billion!



If the Fed do print enough money though to starve off a depression you would then get massive inflation which will cause currency debasement. People's money will be useless as it won't be able to buy anything. It looks like at the moment this is what the Fed is trying to do. Helicopter Ben would be Mugabe's best centeral banking. The Fed are literally following the Zimbabwe economic school of thought which caused people of that country to be severly iimpoverished.

The point I'm trying to make is you can't get around this issue, in the long run pain has to be felt in an economic sense before we enter prosperous times again and a new period of growth emerges.

This does not mean you cannot do well on the stockmarket though.



W.

 

[moXJO]

Yes that is true but comparing our economic problems to the great depression is silly. People in the Great Depression did not have credit cards or loans off the equity of their house. I think now is much worse because our countries and people are in a lot more debt. In 1920 US debt was $25.9 billion, now it is 10,699 billion!



If the Fed do print enough money though to starve off a depression you would then get massive inflation which will cause currency debasement. People's money will be useless as it won't be able to buy anything. It looks like at the moment this is what the Fed is trying to do. Helicopter Ben would be Mugabe's best centeral banking. The Fed are literally following the Zimbabwe economic school of thought which caused people of that country to be severly iimpoverished.

The point I'm trying to make is you can't get around this issue, in the long run pain has to be felt in an economic sense before we enter prosperous times again and a new period of growth emerges.

This does not mean you cannot do well on the stockmarket though.



W.

Yes, will be interesting to see what happens in the future. Btw that wasn't my opinion; apparently that’s what the Fed is actively trying to do. Reading the prior 30's report and doing the opposite. Well I heard it somewhere (cnbc, or some clown show).

Will that be the US secret weapon, inflate the debt away

 

[MrBurns]

Yes, will be interesting to see what happens in the future. Btw that wasn't my opinion; apparently that’s what the Fed is actively trying to do. Reading the prior 30's report and doing the opposite. Well I heard it somewhere (cnbc, or some clown show).

Will that be the US secret weapon, inflate the debt away

So buy property at the ealiest opportunity, ie: when the prices drop but before inflation takes away the value of your cash. (assuming you buy property with cash)

 

[drsmith]

If inflation rises so too will interest rates. Rental yield from property will therefore increase in conjunction with increases in deposit rates. This can only be achieved by increasing rent and/or decreasing property values.

 

[MACCA350]

We must not forget that during the great depression markets rallied some 50% in 1930 before dropping another 90% in 1932. History is your friend.

Yes, but the rally in 1932 started only 2 months after the start of the decline and peaked 5 months later. We are currently already 18 months in..........then again this rally could be over now, or could last 6+ months......who knows

 

[wonderrman]

Sorry this is the third time my fkn computer has frozen while writing this post so apologies if it is not of great length.

Yes, will be interesting to see what happens in the future. Btw that wasn't my opinion; apparently that’s what the Fed is actively trying to do. Reading the prior 30's report and doing the opposite. Well I heard it somewhere (cnbc, or some clown show).

Yes I think I heard something like that somewhere as well. As I have said previously, what do you expect from these monkies? I think I would actually recommend doing the exect opposite of what the people at Fed say. I think you would come out the winner on most occasions.

Will that be the US secret weapon, inflate the debt away

Haha, sadly it looks like that is the cause at the moment.

So buy property at the ealiest opportunity, ie: when the prices drop but before inflation takes away the value of your cash. (assuming you buy property with cash)

I don't know much at all about property so can't really comment on that one. What I would be doing though if I had a fair swindle of cash would be hiring a very experienced trader who actually has a record. Not your everyday guy off the street. I'm talking about people who are in or near the class of Radge. Like the guys he wrote about in his "everday traders" book a few years ago.

Also I would be looking at gold. Trying not to sound like a crazy bear here, but obviously if what we have layed out starts to occur over the next 5 to 10 years then I would be going long gold. I would sit back and watch and see how things pan out first. In a few years time if we are going down this inflation avenue gold would obviously do very well like usual.

In the short term though I think gold will continue to go weaker as it has (1) broken the support line (see enclosed chart). (2) Equity markets look like they will retrace over the next few months as well so this obviously does not hold well for Gold. I would actually be short gold in the near term as we continue to see this bounce. I think the that lvl of resistence at 1000 - 1200 will eventually be broken, but it will tested a few times first. When it does, given the right economic/stockmarket surrounding, it should power ahead. This would be a normal stage of market development considering the surroundings, not the end of the world.



wonder.

 

[wonderrman]

Yes, but the rally in 1932 started only 2 months after the start of the decline and peaked 5 months later. We are currently already 18 months in..........then again this rally could be over now, or could last 6+ months......who knows

Yes that is true. I have some figures for you - it only took us less then 350 days to decline by 50%, compared to 73/74 when it tool 437 days. The 2000 to 2003 bear market decline of 50% took 630 days to complete. We were in very oversold territory so a strong rally entailed.

In the long run I don't see how the time frame effects our overall position though - that the economy is stuffed. Could you elaborate on your point a little please and its relevance? wonder.

 

[MACCA350]

Yes that is true. I have some figures for you - it only took us less then 350 days to decline by 50%, compared to 73/74 when it tool 437 days. The 2000 to 2003 bear market decline of 50% took 630 days to complete. We were in very oversold territory so a strong rally entailed.

In the long run I don't see how the time frame effects our overall position though - that the economy is stuffed. Could you elaborate on your point a little please and its relevance? wonder.

No real point, just noting the time frame differences.

cheers

 

[Aussiejeff]

Yes that is true. I have some figures for you - it only took us less then 350 days to decline by 50%, compared to 73/74 when it tool 437 days. The 2000 to 2003 bear market decline of 50% took 630 days to complete. We were in very oversold territory so a strong rally entailed.

In the long run I don't see how the time frame effects our overall position though - that the economy is stuffed. Could you elaborate on your point a little please and its relevance? wonder.

So, a dead cat really is a dead cat after all - no matter how long it took to die?

 

[Uncle Festivus]

Funny that it (the retrace or resumption?) coincides with the start of real world data ie US company reports, Alcoa being the culprit to kick things off, literally?

They (the presidents working party, or whatever disguise they go under these days - oh yeah, Goldman Sachs ) might try to fool the charts but the fundamentals will still call the shot's in the end.

Goldman Sachs is the bouncing ball - follow that and you know what's coming?


http://www.marketwatch.com/news/story/Goldman-Sachs-bailout-bonanza/story.aspx?guid=%7B504CB844%2DC558%2D4E40%2DB928%2D80C16DECBC05%7D

 

[Aussiejeff]

Speaking of recoveries, has Obama-san gone home to lead his disciples out of the Dark Canyon yet? Or is he reluctant to face the looming homeland reality and instead prefers the company of the international jetset?

 

[MrBurns]

Hey Mr Burns seems like Charlie was right.

BSL up another 25c today.

You should of held for a profit....lol

Nope he was wrong back to where we started, it's just gambling........

 

[Trembling Hand]

it's just gambling........

Yes always is that way for many

 

[Tysonboss1]

Good start today,

Hopefully the last few days was it for the down leg,

I should be so lucky