Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Qualcom Stock Market Harbinger - 12th Aug 22
Apple Exec Gets World's 1st iPhone 14 for Daughters 14th Birthday Surprise Present Unboxing! - 12th Aug 22
Steps to remember while playing live roulette online - 12th Aug 22
China Bank Run Protests - Another Potential Tiananmen Square Massacre? - 11th Aug 22
Silver Coin Premiums – Another Collapse? - 11th Aug 22
Gold-to-Silver Ratio Heading Lower – Setup Like 1989-03 - 11th Aug 22
Severe Stocks Bear Market: Will You Be Among the Prepared 1.5%? - 11th Aug 22
There's a Hole in My Bucket Dear Liza, UK Summer Heatwave Plants Watering Problem Song - 11th Aug 22
Why PEAK INFLATION is a RED HERRING! Prepare for a Decade Long Cost of Living Crisis - 9th Aug 22
FREETRADE Want to LEND My Shares to Short Sellers! - 8th Aug 22
Stock Market Unclosed Gap - 8th Aug 22
The End Game for Silver Shenanigans... - 8th Aug 22er
WARNING Corsair MP600 NVME2 M2 SSD Are Prone to Failure Can Prevent Systems From Booting - 8th Aug 22
Elliott Waves: Your "Rhyme & Reason" to Mainstream Stock Market Opinions - 6th Aug 22
COST OF LIVING CRISIS NIGHTMARE - Expect High INFLATION for whole of this DECADE! - 6th Aug 22
WHY PEAK INFLATION RED HERRING - 5th Aug 22
Recession Is Good for Gold, but a Crisis Would Be Even Better - 5th Aug 22
Stock Market Rallying On Slowly Thinning Air - 5th Aug 22
SILVER’S BAD BREAK - 5th Aug 22
Stock Market Trend Pattren 2022 Forecast Current State - 4th Aug 22
Should We Be Prepared For An Aggressive U.S. Fed In The Future? - 4th Aug 22
Will the S&P 500 Stock Market Index Go the Way of Meme Stocks? - 4th Aug 22
Stock Market Another Upswing Attempt - 4th Aug 22
What is our Real Economic and Financial Prognosis? - 4th Aug 22
The REAL Stocks Bear Market of 2022 - 3rd Aug 22
The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ - 3rd Aug 22
Don’t Be Misled by Gold’s Recent Upswing - 3rd Aug 22
Aluminum, Copper, Zinc: The 3 Horsemen of the Upcoming "Econocalypse" - 31st July 22
Gold Stocks’ Rally Autumn 2022 - 31st July 22
US Fed Is Battling Excess Global Capital – Which Is Creating Inflation - 31st July 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Low Volume Stocks Bear Market Rally and the Real Estate Bust 2010

Stock-Markets / Stock Markets 2010 Dec 30, 2009 - 10:33 AM GMT

By: Claus_Vogt

Stock-Markets

Best Financial Markets Analysis ArticleOne of the most basic technical rules says that sound stock market rallies are accompanied by high and rising volume. By contrast, bear market rallies are characterized by low and falling activity.


Therefore, according to this rule, the rally of the past months has to be treated with great caution. From its beginning in March 2009, it was lacking volume.

As you can see in the lower panel of the NYSE Composite Index chart below, this technical deficiency never healed, and got even more pronounced during the last month.

NYSE Index

Source: www.decisionpoint.com

Especially notable and technically unhealthy was the pattern of rising volume during short-term corrections. Sound corrections are earmarked by low and declining volume.

Taken together, the stock market rise off the March 2009 low has the look of a bear market rally … a huge one in fact. You might even compare it to the frightening experience of 1930.

The Bear Market Rallies Of 1930 and 2009

In 1930, the market rose roughly 50 percent from its 1929 crash low thus recouping half of the preceding losses. This monster rally led many contemporary economists, politicians and financial market experts to reason that the worst was over. But it was not to be …

The Great Depression had barely started, and the stock market suffered losses of another 85 percent measured from this interim high of 1930.

How does the current rally compare to this frightening potential predecessor?

There is a scary similarity between the 1930 rally and 2009’s.
There is a scary similarity between the 1930 rally and 2009’s.

Well, from the March low the S&P 500 has soared 69 percent in nine months. In doing so it recouped a bit more than 50 percent of its former losses. But it’s still 27 percent below its all time high of October 2007.

Yes, the market rallied strongly in 2009. But it did the same thing in 1930. History then tells us that the current stock market rally is not sufficient enough to reason that the worst is over.

In addition, we have to accept the reality that …

The Burst Real Estate Bubble Is Still with Us

The aftermath of the burst real estate bubble is not over yet. We can expect more bad news, more bad debts, more bank failures, and the bad times to last much longer.

If you aren’t convinced, take a look at what the Treasury Department did on December 24:

In September 2008 the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship. At the same time Treasury established Preferred Stock Purchase Agreements (PSPAs) to ensure that each firm maintained a positive net worth.

Based on its recent action, the Treasury Department does not believe that the real estate crisis has ended.
Based on its recent action, the Treasury Department does not believe that the real estate crisis has ended.

Treasury is now amending the PSPAs to allow the cap on Treasury’s funding commitment under these agreements to increase as necessary to accommodate any cumulative reduction in net worth over the next three years. At the conclusion of the three-year period, the remaining commitment will then be fully available to be drawn per the terms of the agreements.

This tells me that the Treasury Department is convinced that the worst of the burst real estate bubble is yet to come. Why else would they be providing unlimited financial support for the two largest Zombie banks the world (outside Japan) has ever seen?

As we move into a new year, the stock market’s technically weak rally and the repercussions of the burst real estate will follow along. So stay flexible with your investment strategy because we could be in for another hard fall.

Best wishes for a Happy New Year!

Claus

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

SHELL
08 Apr 10, 16:57
THIS RALLY IS PURE B S

when the stimules hot air runs out 0 % interest expires and second wavr re crash well see were the stocl market is proble dow 7000 or so s&p 700 or so


Post Comment

Only logged in users are allowed to post comments. Register/ Log in