Thoughts From The Bear Camp: I'm Fading This Move
July 13, 2012 @ 1:00 PM EST
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on Friday, 13-July at 10:25 am CDT
I’ve started to fade today’s rally. Admittedly, my first move to fade was a little early. That's often the case and that's why I start small and build gradually.
The market looks like it is going to put in a "trend day" today during which the market starts with a blast higher, fades only modestly over the next hour or so and then chugs on to new intra-day highs as the day progresses. The indices' closing prices are usually quite close to the day's highs.
I do not believe that "the big picture" hasn't changed much, if at all.
Europe is still a mess and the economic contraction there looks to be getting worse. China's economy is slowing and perhaps doing so at a more rapid pace than the official data would indicate. Remember the "named sources" story from a week or two ago that alerted us to the misreporting of Chinese economic data.
Meanwhile, the U.S. has seen generally disappointing economic data for the past several weeks. Throughout the 2nd quarter data regarding U.S. industrial production, consumer sentiment, retail and total sales, employment numbers, unemployment claims, mortgage applications, home prices, accelerating foreclosures, regional Fed surveys, PMI data and other items generally showed a weakening U.S. economy.
In the past few days, Lakshman Achuthan of the Economic Cycle Research Institute (ECRI) reaffirmed their U.S. recession call. In fact he publicly stated that, when we look back from about a year into the future, we will see that the recession has already started.
Summarizing, in my humble opinion nothing has changed regarding the global economic and geo-political picture.
It's just plain bad and getting worse.
One final note: history shows that large one-day market gains are commonly found in the midst of bear markets and thus today's action may very well be setting up an opportunity for us to "Sell the Rip".
Of course, I could be completely wrong. Hindsight will tell. But the parallels to 2007 continue.
Have a good one...
Curtis Bergquist
Manager – PRO Trader Service
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on the fudamentals i agree with you. you could also add as serious headwinds, the under -funded liabilities of the u.s. federal , state, city, and corporate pensions. however, the near term price action is being called by the hft and hedge fund boyz. they have a lot more money than you and i have.