Well clearly the oversold states I posted about a few days ago have been relieved to some degree. So now what? More rallying, or is this a classic bear-market "sucker's rally"?
There may be a clue in the banking sector: this week many bank stocks hit ALL-time highs... just 2 months after hitting multi-year lows(!?) That measure of technical strength suggests a certain 'hardness' in the banking sector leading the market higher. The banking index (BKX) has this week clearly broken out of its bear-market downtrend channel that had been established for about the last 15 months. Bank stocks appear to now to have gone into full-blown 'bull market' mode. As they led the way down, I expect they will lead the way up.
I know given the conditions that seems hard to believe, but if a recovery of some sort is in the offing, the bottom in the market usually appears months before any of those positive signs are apparent.
That said, like many I have a lot of misgivings about the long-term ramifications of the current bailout(s) being discussed -- and as a matter of principle, I have a bit of a problem with the short-selling ban, even if I stand to profit from it short-term. That is seriously messing with the market's plumbing and the principles and purposes of trading in a free capital market.
But for the time being, the game is on. I'm still 100% long in various index funds. I expect we'll have some pullback in the next few days, particularly as details of the bailout become available and public skepticism ensues. And I would expect to start to see some sector-swinging as we get nearer to the election. But for the market overall, I think we had a genuine capitulation low last week, that will stand for a while at least.
There may be a clue in the banking sector: this week many bank stocks hit ALL-time highs... just 2 months after hitting multi-year lows(!?) That measure of technical strength suggests a certain 'hardness' in the banking sector leading the market higher. The banking index (BKX) has this week clearly broken out of its bear-market downtrend channel that had been established for about the last 15 months. Bank stocks appear to now to have gone into full-blown 'bull market' mode. As they led the way down, I expect they will lead the way up.
I know given the conditions that seems hard to believe, but if a recovery of some sort is in the offing, the bottom in the market usually appears months before any of those positive signs are apparent.
That said, like many I have a lot of misgivings about the long-term ramifications of the current bailout(s) being discussed -- and as a matter of principle, I have a bit of a problem with the short-selling ban, even if I stand to profit from it short-term. That is seriously messing with the market's plumbing and the principles and purposes of trading in a free capital market.
But for the time being, the game is on. I'm still 100% long in various index funds. I expect we'll have some pullback in the next few days, particularly as details of the bailout become available and public skepticism ensues. And I would expect to start to see some sector-swinging as we get nearer to the election. But for the market overall, I think we had a genuine capitulation low last week, that will stand for a while at least.
