Saturday, April 04, 2009

Looking Down into the Geyser

Ever since the bottom, I have been bearish. This is why I'm my own, best contrarian indicator. I am so sick of this rally because I see no logical reason behind it. This rally feels like a bottom because of the relentless recovery, and yet I am very cynical about the efforts being made by the decision makers (both public and private) to turn the economy around.

The technicals point to this rally continuing into next week, but the fundamentals suggest that this is a purely emotional rally. Actually, I'm afraid it may be artificial: where is all that money that was given to the banks? Congress can't seem to get an answer, and yet the banks get a pass while GM is getting raked over the coals. I guess there is a slight difference, I have a GM product sitting in my driveway, but a bank collects monthly for the mortgage on that driveway. I work on my own car and avoid dealers like a TB ward, so GM got my money back in 2001 and won't see any more for a while.

Still, what ARE the banks doing with all that money? Paying their own loans, sitting in cash? Banks make money by investing, and many have large trading floors that move a LOT of money daily. I'm not one for conspiracy theories, but who's to say that the banks aren't quietly buying back their own stock, as financials have led this rally? Again, I don't like crackpot theories, but $760 B into financials for 3 strait weeks WOULD explain a lot, like why Congress is giving them a pass (because THEY KNOW). I'm just saying...

So, I still have much difficulty believing in this rally, which has made me "too smart" to read the Trend. Therefore, I have been staring down into the flow of this geyser as it has blasted me in the face. This week, I've listened to a parade of economists on Bloomberg Surveillance predicting lower lows in 3rd QTR 2009...oops, just heard one say 2nd QTR, before we go back up.

This rally is tired. Remember that the trend is your friend, and don't try to outsmart the technicals. Last week's technicals are showing bullish ascending wedges and pennants, XLF looks like a flag. This is all bullish, but I get more skeptical every day.

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