Sunday 12 April 2009

Bear market rally?

There we are at a crossroads point. There is been a massive rally on the last four weeks, based on a view of potential "green shots" on the economy. I do honestly think is noting more than a massive bear rally, which by the way is healthy to happen, more all has been based in false hopes, I'll explain, when I say false hopes not that the numbers are lying, they are just being put in a contest where the expectation been too low so a stabilisation of the deterioration of the economy is seen as more positive than actually is, at least in my view, and once investors start again come back to earth and admit they actually were putting themselves ahead of the possible recovery, which is still far by the way, they will start selling again or at least taking profits!
I do believe is still didn't saw the lows for this bear market, because if you look to it in terms of valuations and compared the numbers to other recession, at least the ones as deep as we saw until now one this last recession we are still living, you soon realise the valuations at the moment are still to much high, to the point where we can say we saw a bottom, we still didn't saw pure capitulation even on the 6Th of march wasn't still capitulation.
We just need to look at volume, this rally has been based in low volume, characteristic of trap bear market rally !
I am looking maybe we still see a bit more advances , maybe to the 874 level on the s&p but if we get there the bears will come back on masses, giving us the potential for a massive sell off !

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