Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

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


© 2005-2022 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