Thursday, April 2, 2009

Did Someone Say, "Depression"?

"WE ARE OUT OF THE DEPRESSION!!!!" That is what I heard this morning by our favorite contrarian indicator himself. He now claims we have been in a depression and now we are out of it. In December, he said we hit our lows in November and no only is this not a depression, this really isn't even a recession. Now that we have a big bear market rally, he is claiming it really was a depression but it is all behind us.

Is that so? The 5.7 million U.S. workers who are claiming unemployment benefits would beg to differ. As is the over 1.5 million estimated other workers who no longer qualify for unemployment benefits due to them being out of work for longer than 6 months. Yes, unemployment is a lagging indicator for when the economy improves, but unemployment has to slow down to have any hope of an economic recovery. The idiot on CNBC says unemployment is meaningless. Ignore the numbers. Don't worry about them. Well, maybe when the market turns back down and tests the lows again and his show is thrown off of the air, maybe he will see what it is like to stand in an unemployment line and have a little more respect for those who are struggling in his "new bull market".

One more beef on our friend at CNBC. When the market was under 700, he was telling people to stay out of the market. Avoid banks. Now that it is above 800, he says get in the game, buy banks. What happens when the market goes back under 700? Anyone want to guess? By then, he will be off the air and likely sued by many investors who jumped back in with their 401K and lost another 30%.

Today was a nice follow throw on the M2M news. Another bullet fired by the gov't to prop up the financials. Banks now have the opportunity to value truly worthless assets as being worth something. While this may seem like great news, it really is not all that great for banks. It will only apply to a very small percentage of their assets and may improve earnings by 4% at best. Asset values continue to go down and will continue to go down. Banks will show operational profits but their balance sheet will continue to show massive losses.

The media wants to claim the G20 news about $1T being earmarked for global recovery was great news. Uh, $1T???? that doesn't cover how much AIG will need for its complete bailout when that deal is said and done. $1T is nothing. It is non news.

I know this feels like a bull market but rest assured, we are in a bear market. Bear markets do not come to an abrupt end and turn right into a bull market. Consolidation happens and the bottom has to be tested and solidified. This has not happened yet. It will. M2M changes only put off that inevitability.

Did anyone notice the VIX this week? Of course you did! The VIX goes down when the market goes up, right? Well since March 12th, the market is up 10% and of course, the VIX must be down, right? Wrong! The VIX is up during that period. Is fear leaving? Is uncertainty leaving? NO!

Earnings season is upon us. Many companies are going to surprise on the upside due to estimates being lowered. GOOG will do this. Cisco, HP, Dell are likely to do the same. All tech. But by in large, numbers will be bad. The key here is, the market is now priced a bit ahead of itself, expecting better numbers since the media is pounding the table that housing is up, GDP slide is slowing, banks are profitable. Lets see about that.

OK, enough of the rant. I am in rhythm with this market. Last night I was not sure where the market would go since news was going to drive it. I gave a couple of scenarios and one of them played out. The market rose on the news but on low volume and fizzled. The only thing missing in the market were the bears. If the bears show up, the market will slide.

The VIX is ready to bounce. The S&P is at resistance. TA clearly shows that we should have a downward correction. And we will. Starting tomorrow, I think.

The key signal to watch for is simple. Watch the VIX at the open. If it opens above 42.04 we will have a down day in the market and will likely have a steady slide down. Probably back to the 810 range.

If the VIX opens lower than 42.04, then we will likely finish on an up day. It means that you should buy on any dips in the market. It's that simple. The VIX historically will open lower on Fridays and when that happens, a high percentage of the time it will close lower. But if it opens higher on Fridays, it has a high probability of closing higher. Strange phenomenon.

If the VIX opens and closes higher, and the S&P closes in the 810 range, I look for early next week we test the 763 area. The market needs to let some air out and fill a gap. What will be interesting then is what happens after. Earning will begin to trickle in and may drive the market. We also have to watch what the banks are saying about PPIP and M2M changes. Today, BAC said M2M changes has very little effect on their bottom line.

Remember where our economy is. Don't get caught into the hype.


  1. Great post... love the pics.... keep em coming......

    and thank you, thank you for forgiving and forgetting.....

    anyone that owns a dog like my moon is alright by me....

  2. great work.

    is he really that bullish now? (missed it today)

    I love cramer, he's the BEST clue of when the easy trade is over....

  3. Cramer is insanely bullish. I have a feeling we are going to see some of his latest antics on youtube and on Jon Stewart in about a month when the market retests the lows.

  4. Lara, we want to see a pic of your dog on your site.

  5. im not that confident we take out 666,

    we need the $UDS to cross 90.02 (the 38% retracement)....IF we get that, THEN i think its more than likely, but as long as the dollar stays under 90.02, im looking for 730ish as next bottom (based on the weekly rsi)

    but the dollar must break that retracement level for us to get rolling big time longer term to the downside....jmo

    and thats more long term thoughts.....

  6. nice ads....i cant stop clicking them... lol

  7. I had my dog moon when I was in college after I moved off campus. Sadly, he didn't make it all these many years. I had two black pugs for awhile, cutest things, but they are gone too. We haven't chosen a new dog yet. But my moon was the most silver of weimies. And the most loyal and loving dog of my life. I miss him.

  8. In Atlanta, I owned a large Akita. Gorgeous, but everyone was afraid of him. He was like an enormous St. Bernard size. A big teddy bear.

  9. lara, why cant i post comments on ur blog?

    says something about "member only"???

    im on your list (follower) etc

    ? ?

  10. Great post.

    re: Cramer, I saw his nonsense about the Depression being over. That leaves him enough hedging room to say I didn't say the recession was over. As usual, he left a little wiggle room.