Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19
ADL Predictive Modeling Suggests A Big Move In Silver - 7th June 19
US China Trade War Will Start a Recession, or Worse… - 7th June 19
Land Rover Discovery Sport Brake Pads Expected Life, Worn Pads Dash Warning - 7th June 19
The Post Room Selfies Fun at Meadowhall Sheffield, From Game of Thrones to Desert Island... - 7th June 19
SAMSUNG - South Korean Electronics Giant - Investing in AI Stocks - Video - 7th June 19
Gold Price Rally or New Bull Market? - 7th June 19
Digging into the Rising Gold: Trade Tensions, Recessionary Worries and Dovish Fed - 7th June 19
The Risky Stocks Big Lie That Keeps Many Investors Poor - 7th June 19
Gold and HUI Short-term Strength Is a Strong Call to Action - 7th June 19
Fear Drives Stock Market Expectations - 7th June 19 - Chris_Vermeulen
Next British Prime Minister Tory Leadership Betting Markets - 6th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Stocks Bear Market Relief Rally is Weaker than Expected

Stock-Markets / Stocks Bear Market May 08, 2008 - 09:19 AM GMT

By: Brady_Willett

Stock-Markets Best Financial Markets Analysis ArticleThe only thing remarkable about the recent rally in U.S. equities is how unremarkable it has been. To be sure, you would think that with the ‘worst' being ‘over' stocks would be able to mount a significant bounce.  This hasn't been the case, at least not yet. 


To put the above rally in perspective, during the last bear market the S&P 500 notched 3-notable rallies before finally reaching a bottom.  Assuming the October 9, 2007 S&P 500 close of 1565.15 proves a ‘top' and/or we are in a bear market (which has not been confirmed on a closing basis), today's 11% jump is exceptionally weak by comparison.

Incidentally, there is the argument - recently explored by Russell the revisionist – that stocks are still in a long-term bull market. However, what quickly busts this theory is common sense: for the 7½ years ending October 9, 2007 the S&P 500 gained a total of 2.5%!  Does this price action really represent the continuation of the 1982-2000 bull market? (Russell the realist would no doubt remind us that the 2.5% gain in the S&P 500 from March 24, 2000 to October 9, 2007 translates into a significant decline when priced in most non-USD currencies).

Leaving the realm of bulls and bears, it may be important to note that the current market rally is backed by some potentially potent near-term drivers.  First and foremost, the yield on so called ‘sidelined' capital (primarily parked in money market funds) has reached a point where it doesn't match inflation. Some market timers think – a la Greenspan's 2003 trick – that this means the Fed has reduced interest rates low enough to entice some of this money back into equities. Next, volatility is showing signs of trending down, and with the Fed essentially guaranteeing the survival of any party too ‘interconnected' to fail it is plausible that we have entered a period of calm. 

Finally, the shorts, which aggressively covered some of their positions following the Bear Stearns bailout, are still holding a historically high short position. If a major move higher transpires these shorts could be burned, adding some volume to the buy side of the equation.

Is the ‘sidelined'/VIX/short selling story reason enough to buy stocks now?  Unfortunately no. Rather, the more pressing story is that as the Fed tries to hit the reset button on the credit bubble the U.S. economy is threatening to go tilt. Quite frankly, even if you assume that the Fed will be entirely successful in its efforts to stimulate lending and bring risk taking back to the financial markets, there is the real risk that dangerous amounts of inflation are sticking in the system (if the period of creative destruction that is ongoing in the housing market and structured finance markets is not enough to quell the inflation monster what are the odds that U.S. stock market and economic rebound in the latter half of 2008 will do the trick?)  When you combine these uncertainties with the unattractive market valuations it is clear that pinball wizards need only apply to the speculative bets being made in equities today.

In short, the mayhem that erupted in late 2007/early 2008 has indeed calmed, but many years will likely have to pass before it is removed.  With the Fed, U.S. government, and U.S. consumer forced to adopt emergency measures to simply keep up the norm a little while longer, those that cheer the relief rallies and unsustainable economic bounces may end up doing so at their peril.

“The increase in consumer debt totaled $15.3 billion at an annual rate in March, much bigger than the $6 billion increase that economists had been expecting. The bigger gain was seen as a sign that the weaker economy was forcing consumers to increase their borrowing to support spending…AP ~ FED

By Brady Willett and Todd Alway
FallStreet.com

FallStreet.com was launched in January of 2000 with the mandate of providing an alternative opinion on the U.S. equity markets.  In the context of an uncritical herd euphoria that characterizes the mainstream media, Fallstreet strives to provide investors with the information they need to make informed investment decisions. To that end, we provide a clearinghouse for bearish and value-oriented investment information, independent research, and an investment newsletter containing specific company selections.

Brady Willett Archive

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


Post Comment

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

6 Critical Money Making Rules