** Market outlook this week...
What is this bear rally based on?
1. PPIP? - A scam to get toxic assets off the books of banks and onto taxpayer shoulders - celebrated with a rally.
2. M2M? - Enron accounting made legal - celebrated with a rally
3. WFC record earnings? - by avoiding $10 billion in merger writedowns, WFC could report fake record earnings - celebrated with a rally. Yet they will issue shares or beg the govt for more $$$, just like every other bank. "We made $$ but gives us $$ so we can survive". Right.
JPM trading at P/E of 30, when during a recession it should be 8-10, and this is no recession. You can't possibly be serious.
What are the fundamentals?
1. Baltic Dry index is falling
2. USD is rising
3. house prices falling, foreclosures rising
4. unemployment rising
5. GDP negative and falling
This is truly the mother of all bear market rallies. This is all hype and emotion, a classic penny stock pump and dump. Driven by fear of missing a "generational bottom" and too much hope attached to empty banking promises...You listen to the bulls frothing at the mouth...as they talk about a new bull market, turning the corner and destroying all shorts. That's emotion, there is no rational talk on the bull side.
Volume is disappearing as this rally goes higher and higher...and once these steroid injections stop working, and the blind euphoria wears off...it'll be a rush for the exits a la October 2008....DOW rapidly dropping 2000-3000 points from here within weeks is not only a possibility, it is a probability...
What you'll get, is a fear of missing the bottom, will turn into fear of losing all profits - en masse...there will be a stampede and a rush for exits...the fall will be rapid because there is no one left to buy. All dips have been bought, anyone who believed in this rally has already bought. And whoever has been short, has either been killed by this rally, or is waiting on sidelines to re-short.
Because VIX is at 36....because everything looks safe and coast is clear...the upcoming sell off will hit like a giant Tsunami...sweeping everything in its path. It seems unfathomable now...which makes it all the more likely to happen. This is March.6...except in reverse...
Out of the many T/A indicators supporting this scenario, none is more convincing than the $SPXA50R - or the % of S&P500 stocks above their 50-day average. As of April 9, this indicator reached a level seen at every absolute peak in the last 3 years...
So the sell-off may begin as early as monday April.13...how quickly it turns into a bloodbath is still an unknown...it may take a bit of time to get going, or it may begin rapidly...SKF,FAZ,SRS,SDS,DXD,ERY will all benefit to various degrees.
..but there will be a sell-off...and it will be rapid...I do expect some sideways action around S&P 740-750, because I suspect there will be enough bleeding bulls willing to double down on such a nice dip...but the sell pressure will be too great to overcome, and we should be testing lows sometime in May. Of course, being prematurely short, has almost killed my portfolio...so I will simply be trying to survive and heal my wounds...the shorts that have survived up to this point, will thrive...
