Sunday, April 12, 2009

There will be blood!

Thanks to Evil Speculator for this cry of doom & gloom, here at the peak of this Bear Market Rally.

Things have been going well, and the charts look like we're piercing through resistance lines left and right. But I still can't stop feeling that this whole rally is artificial, and it just won't be enough to float us until the fundamentals catch up. Creeping inflation is still hitting us while the FED denies it through "Core CPI", we've printed more money than EVER to bail ourselves out, and we now have a bunch of financial institutions who are technically government owned.

Over Easter, I spoke with my sister-in-law, who is a manager at a big bank. She says that the TARP funds were originally going to have to be held by the banks for a minimum of 3 years while they paid interest to the gov't, but now it's down to 1 year minimum. They still have to pay that interest, and were forced to take the loans by the government. Bailout or not, I don't care what they say or how much we're mad at the banks, but the Feds scammed the banks for some guaranteed interest payments while telling the rest of us that it was for our own good. Why can't politicians just come right out and say what they're really doing? Is it so bad to dance around these feel-good explanations instead of just telling us what's going on? Are we, the people, that ignorant? Probably so, so I'll just stop that rant right there.

But this particular bank can't wait to pay back it's TARP money (which every single bank in the country had to take, big or small), and thinks it will be rockin' in a year, especially when it's acquisition comes through of another major financial firm with big-hitter money management accounts. In a related note, Goldman Sachs wants to dump $5.5B of itself into a fresh stock offering so that it can pay off its TARP money NOW!

So, the banks are optimistic. The bulls are optimistic. The charts are even looking optimistic. Look how a the S&P continues to channel up through repeted declining RSI and MACD curves:

But with all these gaps up and down overnight, retailers like me are taking a step back after getting burned a few times. This bull looks like it could keep going, but it's also looking pretty tired. Earnings come out this week, Wells Fargo put the market into a Second Stage booster lift through premature annouce-ulation. Did they really need to do that, or was the market losing steam too early?

In snort, I am so cynical about this market and rally. It's still way too choppy, and I suspect we may see more blood & chop up to about S&P 880 (max) before a serious, more prolonged "correction."

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