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What a week

Started by pkamm, 09/20/2008 06:36AM
Posted 09/20/2008 06:36AM | Edited 09/20/2008 06:37AM Opening Post
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.
Posted 09/20/2008 07:39AM #1
Paul,
I actually believe this action will lead to a period of rallying, the effect of the bailout is to push reality into the future, there will be some cash to be made here, but 2-3 years out as the repurcussions of the taxpayer's grandchildren taking on whatever bad debt ensues, coupled with inflation won't be nice. The deal bought time for the big guys, and hopefully smart little guys. We need regulation, penalties, oversight and boards that give a rat's butt. For me, I bought a financial stock I've owned on and off for 10 years 2 days ago, its up about 20% in the last 2 days, next week, I'm probably out.
Posted 09/22/2008 08:06PM | Edited 09/22/2008 08:07PM #2
Today we got a good pullback that closed the uncomfortably conspicuous gap on the Nasdaq that developed Friday. The gap-ups must be closed and today accomplished that much.

While that went on, action on the oil front was nuts -- the commodity markets are betting the bailout will be inflationary.