Recovery or Dead Cat Bounce?

[enigmatic]

alphaman i dont think Pythagerous was stating he knew when unemployement would peak, how is an obvious question when the demand for jobs starts increasing.

I think the point he Pythagerous was making is that typically as an employer you will not start taking on new people until the market you are in is showing improvements. Your not going to employ someone new if you think there could be a worse yet to come, thus you wait see the economy is recovering then you see your business improving and you employ more. Unemployement goes down..

But this however is not helping me in picking the bottom, we dont know unemployement is at its bottom until well after the fact that the market has started to recover.

 

[alphaman]

I don't know how high unemployment will get, or when the peak will take place, however I do know that the peak of unemployment will come after the market bottoms out.

I don't know when unemployment will peak either. All I know is it could have already peaked (for the optimistic and can't wait to pick bottoms), or it will peak sometime in the future.

Now armed with the knowledge that market bottom precedes unemployment peak by a certain amount of time, I've come to the shocking and powerful conclusion that market has either already bottomed, or will bottom sometime in the future!!

 

[wonderrman]

I dont see how we can have a sustainable 'recovery' when we are still just at the beginning of an econonic down turn. The 'bear market rally' could last for a week a month, then all we need is some more bad news to send us back to reality.

No one can read the future but everyone was leveraged to the hill before everything turned to ****. 20 years of over borrowing and debt build up cannot be undone in 18 months.

I don't think the next bull market will be as fearse as the previous 04 - 07. Many people have lost faith in Wall Street and the products they produce. They're not going to be as profitable and people will not be in love with credit/debt/fake money as they are now. Bank managers are going to be tight with lending for a while so I don't think there will be as much consumption in our communities, profits will not be as great so share prices won't be.

Chuck long-term investing out the window unless your investment timeframe is 10 yr +, fundamentals are based on the past. The future could be very different. Short term, event-driven trading will win for the next few years one would think.

 

[sammy84]

I look at this more like a pre-rally with the true rally is around the corner now. History suggests that once last rally is necessary before the bottom can be put in place. Elliot wave theory also confirms one last push higher before the final bottom is in place. My bear shooting gun is in position and ready to fire :bigun2:

 

[Pythagerous]

It is easy to say that people will be burnt out from the sharemarket forever, but when the big companies start making a profit, and these are returned to shareholders in large dividends, people will start leaning towards them again.

 

[dhukka]

Interested to hear what everyone's thoughts are on the last few days of positive trading in the market.

Could this be signs of recovery, or is it simply a rally following Citi's news?

Putting aside the facile ritual of the media trying to explain every tick of the tape with an event, I wanna address the ridiculous smoke and mirrors shell game that Citi is playing. The idea that Citigroup was profitable for the first two months of the year is absolutely and utterly ludicrous.

The leaked internal memo that claimed Citi was profitable was before any write-downs or provisions for credit losses. That's like saying there were 12 hours of sunlight yesterday, it was cloudy for 10 of them and sunny for 2. Thus yesterday was a sunny day excluding the cloudy times.

If Citigroup is such a profitable machine, why has the US government injected $45 billion of capital into the firm and guaranteed another $300 billion of their assets?

Citigroup is insolvent, plain and simple and it is only out of bankruptcy because of the intervention by the US government. Credit losses on commercial real estate credit cards and other consumer loans are only just getting started.

rant over.

 

[Aussiejeff]

I look at this more like a pre-rally with the true rally is around the corner now. History suggests that once last rally is necessary before the bottom can be put in place. Elliot wave theory also confirms one last push higher before the final bottom is in place. My bear shooting gun is in position and ready to fire :bigun2:

I look at this more like a pre-CRASH sucker rally. History can suggest nothing at this point in time. Nor can Elliot.

My bull shooting gun is in position and ready to fire.

 

[Temjin]

Is it just me or do I still see a lot of "old" bullish sentiment lurking around here?

Ok, let say we will see a bottom sooner or later, but does that necessary mean it would the greatest investment opportunity in your life time? What would you do? Would you put everything back in and expect the original bull will roar back into the market? Or that the "previous peak" of the market will eventually be reached over the next 2-3 years?

What is your "future" expectation of the stock market after the bottom has been reached? What will be your actions? That's the sort of answers I would like to know.

Let's discuss...

 

[MS+Tradesim]

What is your "future" expectation of the stock market after the bottom has been reached? What will be your actions? That's the sort of answers I would like to know.

Let's discuss...

Lots of up and down swings allowing for short-term longs or shorts. No bull for some years to come. Too much crap in the pond.

I have two systems currently running on shares and CFDs - both have hold times of not more than 2 days. Will reassess if/when a sustained rally eventuates.

 

[enigmatic]

I think the main thing is not to pick the bottom but to pick as close to the bottom as you can justify based on your personal risk rating.

Not to sure how others will judge the market as a return to the "good old days", But I myself will be watching the XAO and DJI 150MVA for my first indication to start entering the market, and once the 250MVA is breached i will consider entering roughly 75-90% of my share portfolio back into the market. selling and buying back if a cross of the 250MVA is made.

I think the important thing is not to try and pick it to close and if you are not with all your capital, generally you are going to be left feeling disappointed as the market moved furth down from your position.

 

[sammy84]

My bull shooting gun is in position and ready to fire.

Well our guns are aligned then. May the bigger gun win. :shoot:

 

[M34N]

Putting aside the facile ritual of the media trying to explain every tick of the tape with an event, I wanna address the ridiculous smoke and mirrors shell game that Citi is playing. The idea that Citigroup was profitable for the first two months of the year is absolutely and utterly ludicrous.

The leaked internal memo that claimed Citi was profitable was before any write-downs or provisions for credit losses. That's like saying there were 12 hours of sunlight yesterday, it was cloudy for 10 of them and sunny for 2. Thus yesterday was a sunny day excluding the cloudy times.

If Citigroup is such a profitable machine, why has the US government injected $45 billion of capital into the firm and guaranteed another $300 billion of their assets?

Citigroup is insolvent, plain and simple and it is only out of bankruptcy because of the intervention by the US government. Credit losses on commercial real estate credit cards and other consumer loans are only just getting started.

rant over.

dkukka; you took the words right out of my mouth! A company that (supposedly) creates a profit after having $45b injected into it is not something I consider positive. I will cheer and celebrate when these companies turn a profit without the taxpayer bailing them out every few months with another lousy 20b here, 40b there...

I also find it funny that people can conclude a bottom in this bear market based solely on 3 trading days. It's more logical to consider this a simple rebound after a series of sharp sell-offs. It's also a sigh of relief as the fact that nothing worse had come out of the market in the past few days and all the bad news has been factored in - for now. The better question is how many consider this another bull trap similar to the rebound after the sell-off in November?

 

[Logique]

I don't know when unemployment will peak either. All I know is it could have already peaked (for the optimistic and can't wait to pick bottoms), or it will peak sometime in the future.

Now armed with the knowledge that market bottom precedes unemployment peak by a certain amount of time, I've come to the shocking and powerful conclusion that market has either already bottomed, or will bottom sometime in the future!!

The share price of Seek Ltd (SEK) might be considered a proxy for employment trends, via it's web vacancy advertising business, so if we begin to see some life it might signal some stabilization of the employment numbers. It's been hammered like everything else, but has been bouncing between 2.10 and 2.60 during the last month. Some brave traders working the indicators and doing well for themselves on big % swings.

 

[sinner]

The better question is how many consider this another bull trap similar to the rebound after the sell-off in November?

We can consider Ashraf Laidi's work here

http://www.ashraflaidi.com/articles/fx-implications-of-supply-driven-rally-in-yields.asp

and newer here

http://www.safehaven.com/article-12817.htm

Calling for 850.

Pretty detailed analysis.

 

[prana]

DCB

 

[alphaman]

The share price of Seek Ltd (SEK) might be considered a proxy for employment trends

It could be, but SEK has such a short history, we cannot backtest the idea.

Anyway my point is, as exciting and encouraging as it might sound, the fact that market bottom precedes economy bottom is actually quite useless for picking market bottom.

 

[MRC & Co]

As far as the technicals, wait until the retailers get bullish again and look for it to push through lows.

As far as the fundamentals, figures don't look to be getting much better, if at all globally. Even if GDP is negative, as are employment figures, non-farms, Japan machinery orders etc but they begin to become less negative, then we may start to see some kind of decent stabilization and rally.

 

[michael_selway]

As far as the technicals, wait until the retailers get bullish again and look for it to push through lows.

As far as the fundamentals, figures don't look to be getting much better, if at all globally. Even if GDP is negative, as are employment figures, non-farms, Japan machinery orders etc but they begin to become less negative, then we may start to see some kind of decent stabilization and rally.

Very interetsing mothn ahead

 

[nunthewiser]

Intresting chart ........... thankyou

 

[MRC & Co]

Very very interesting.

Thanks Selway.