A young boy enters a barber shop and the barber whispers to his customer, "This is the dumbest kid in the world. Watch while I prove it to you."
The barber puts a dollar bill in one hand and two quarters in the other, then calls the boy over and asks, "Which do you want, son?" The boy takes the quarters and leaves the dollar.
"What did I tell you?" said the barber. "That kid never learns!"
Later, when the customer leaves, he sees the same young boy coming out of the ice cream store & says; "Hey, son! May I ask you a question? Why did you take the quarters instead of the dollar bill?" The boy licked his cone and replied, "Because the day I take the dollar, the game's over!"
There are some positive factors starting to emerge, which might make one think that the character of the market may be undergoing a change, and that this may indeed, be the end of the primary downtrend. Pockets of momentum are beginning to appear, and traders are more than willing to aggressively chase them, and pullbacks have been met with investors looking to put capital to work. There has been some leadership in the tech sector, but there is no doubt, that some of the strength we are experiencing is due to end of the quarter seasonal factors. This market has yet to be really tested, as it desperately needs to do some backing and filling, and prove to us that there can be further consolidation and accumulation, on even more pronounced retracements.
But, while the market has rebounded over the past three weeks, the economic conditions haven't improved. The 3 week reflexive rally has been on relatively low volume, reflecting a low level of confidence, and a lack of institutional support, and the financials have lagged. The same problems that caused the economic crisis in the first place, are still there, causing continued damage to the global economy. While we may experience a slowdown in the rate of contraction of the global economy, growth is still going to be negative, and if the crisis is not handled correctly, we may have a repeat of what happened in Japan, which was a very protracted deflationary recession.
Unemployment continues to grow, as home prices continue to erode. The current sentiment or consensus of the markets is overly optimistic, upcoming earnings have the very real ability to disappoint, and shocks from the derivatives crisis and further insolvencies in the financial system are probably not over.
Smart play?... If you caught this move, take some money off the table.
